Getting access to a substantial amount of capital can open the doors to endless opportunities for your business - from opening new locations to increasing your capacity, acquiring other companies, or purchasing expensive equipment. However, if you are looking to qualify for a large business loan, there are a few essential steps that you will need to take in order to secure the extra funds you need. Most lenders will want to see a good credit score, a minimum amount of revenue generated annually, and other key components that constitute your financial profile.At National Business Capital, we know that the process of qualifying for a large business loan can often be daunting - that’s why we prepared this comprehensive guide to take you through each step for a stress-free journey.
What Is a Large Business Loan?
So, what exactly is a large business loan? It refers to a substantial financial amount that lenders offer to borrowers, typically ranging from $500,000 to several million dollars, such as $5 million or $15 million. These loans enable businesses to undertake major projects that can help them gain a competitive advantage in the market or improve their long-term strategic development.
What Are Some Use Cases For a Large Business Loan?
As we mentioned earlier, you can use a large business loan for a wide variety of purposes, such as:
Acquiring real estate properties
Facilitating mergers
Financing the acquisition of another company
Managing cash flow
Covering operational expenses
Bulk purchasing or stocking up on inventory
Opening new locations
Scaling up production facilities
Consolidating existing debts
Marketing and Advertising
Research & Development
Before we move into the key steps for qualifying for a large business loan, here are a few scenarios to better illustrate the main use cases:
Scenario #1 - Opening New Locations
A successful restaurant chain wants to open 3 new locations in New York City. Each location requires a substantial amount of upfront investment, including interior construction, lease deposit, equipment purchase, hiring staff, and Marketing efforts.The restaurant has obtained a $3 million business loan to cover the costs associated with the expansion, from leasing prime commercial spaces to renovating each location, as well as hiring and training new employees to ensure consistent quality. They’ve ran the numbers; Each store will generate enough revenue to cover their repayment without interfering with daily operations.
Scenario #2 - Acquiring a New Company
A mid-sized company in the software industry wants to acquire a smaller competitor that has developed a complementary, patented technology. The acquisition will allow the company to improve its product offerings, and gain a competitive advantage in the market.The company has obtained a $7 million business loan to finance the acquisition. This covers the costs for purchasing intellectual property, existing contracts, as well to integrate the acquired technology into its own product offerings. By leveraging debt instead of cash flow, both companies can continue operating without slowdown.
Scenario #3 - Investing in Real Estate
A consulting company wants to diversify its revenue streams and enhance its long-term financial stability by investing in real estate. The firm wants to purchase a prime office building in the local business district, but they lack the funds for the project.The consulting firm has obtained an $8 million business loan to purchase the office building and modernize its office spaces. This will attract high-quality tenants, allowing the company to generate rental income and diversify its revenue stream.
How Do I Qualify For a Large Business Loan?
Now that you have a better understanding of what a large business loan is, and what are some of its practical use cases, let’s take a look at the steps that you will need to take in order to qualify for a large business loan.
1. Determine Your Business Needs
Before you start researching lenders and loans, it is crucial to determine the amount that you will need for the business loan, as well as its purpose. To do that, make sure that you:
Identify The Loan Purpose - Determine whether you will use the loan for working capital, debt refinancing, expansion, real estate, or equipment purchase. This will give you a good idea of how to start calculating your costs.
Break Down The Costs - Before you are able to qualify for a large business loan, you will need to have a good understanding of your expected costs. Identify all significant expenses related to your purpose, such as renovation, equipment, etc.
Create a Detailed Budget - Make sure to organize your costs into categories, and assign realistic cost estimates to each category. We also recommend adding a buffer (10-20%) for unexpected costs.
Analyze Financial Statements - Review your cash flow statements, income statements, and balance sheets to assess your profitability - and determine your borrowing capacity and collateral availability.
Project Future Performance - Take into account your revenue projections based on historical data and market research. It’s also important to estimate ongoing and additional expenses associated with the loan purpose.
Once you’ve taken these steps, add up all identified costs and contingency buffers to determine the total funding required. Don’t skip this exercise - underestimating the amount can leave you short of funds, while overestimating it may lead to unnecessary costs.
2. Check Your Credit Score
In order to qualify for a large business loan, the next step you’ll need to take is to check your credit score. Considering that this is a significant factor for approval, this will give you a better idea of where you stand with lenders and whether you are in good financial health.For large business loans, lenders typically prefer a credit score of +750, although a credit score above 700 is still considered very good. Alternative lenders, such as NBC, are more flexible with credit score requirements, even if your credit score is less-than-perfect. You can check your credit score by requesting a report at major credit bureaus such as:
Always check for errors, discrepancies, and inaccuracies, and dispute them if needed.
3. Gather Financial Statements
If you want to qualify for a large business loan, the next step is to gather your financial statements - they will be needed for the application process. This typically includes:
Income Statements - Including revenue, Cost of Goods Sold, net profit, etc.
Balance Sheets - Detailing assets, liability, and equity.
Cash Flow Statements - Including operating, investing, and financing activities.
Tax Returns - Your business’ tax returns for the past 2-3 years.
Other Documents - Lenders may ask you for other supporting documents, such as an Accounts Receivable Aging Report, Debt Schedule, etc.
4. Develop a Detailed Business Plan
Developing a detailed business plan is another step that you will need to take if you want to qualify for a large business loan. It should include: an executive summary, business description, market analysis, organizational structure, product line or services offered, marketing and sales strategies, funding request, financial projections, and an appendix with supporting documents. A comprehensive plan demonstrates to lenders your business’s viability, strategic direction, and ability to repay the loan, thereby enhancing your approval chances.
5. Calculate Financial Projections
The next step to qualify for a large business loan is to calculate your financial projections. This typically includes:
Revenue Projections - Use historical growth rates as a baseline for future projections, adjusting for expected changes in the market or business operations.
Expense Projections - Identify and project fixed costs such as rent, salaries, and insurance. These are relatively stable but should account for any planned expansions or new hires.
Cash Flow Projections - Project the cash flow from operations by estimating cash receipts from sales and cash payments for operating expenses.
It is important to ensure that your financial projections are consistent with the strategies and goals outlined in your business plan.
6. Assess Collateral Availability
Before you begin the process of qualifying for a large business loan, you should also assess your collateral availability. This is especially important if you are applying for a secured loan, which will require collateral to protect the lender from defaulting. Evaluate your business assets like real estate, equipment, inventory, and accounts receivable. Personal assets, such as property or investments, can also be considered. Ensure that your assets are appraised accurately to determine their value, and prepare detailed documentation for the lender. Having substantial collateral can enhance loan approval chances and may lead to better loan terms.
7. Prepare Legal Documents
Preparing the necessary legal documents is crucial if you want to qualify for a large business loan. They may vary depending on the lender and the loan, but they can typically be summed up in the following:
Business licenses and permits
Articles of incorporation
Operating agreements and bylaws
Partnership agreements
Contracts and leases
Debt agreements
Insurance policies
Intellectual property documentation
8. Choose a Lender
Now that you have taken the necessary steps to prepare for qualifying for a large business loan, it is time to choose the lender. Don’t take the first offer you see on the market - make sure to perform your due diligence before applying, and research different options to see which one will fit your needs.National Business Capital has made it easy to do that - with a single application, you can get dozens of exclusive offers within minutes. It allows you to easily compare your offers so you can choose the one that fits your needs the best.
9. Submit Your Application
Once you are done preparing your documentation, the last step is to submit your application. With NBC, you can expect a fast and streamlined application process to help you qualify for a large business loan. You can also get expert guidance from our Business Finance Advisors for a fully hassle-free process.Are you ready to get started? Apply here.
10. Collect Your Funds
Once you get approved, you can collect your funds and start working on your project. Qualifying for a large business loan opens the doors to a myriad of opportunities to take your business to the next level - don’t hesitate to take advantage of them.
Qualifying For a Large Business Loan With NBC
If you want to qualify for a large business loan, look no further than National Business Capital. With $2+ billion financed since 2007, multiple awards, and an experienced team of Business Finance Advisors, we have everything you need to find the best financing options for your project.Are you ready to get started?Apply here.
ABOUT THE AUTHOR
Phil Fernandes
Chief Operating Officer
Phil Fernandes serves as Chief Operating Officer for National Business Capital. He boasts 15 years of experience in sales and 10+ years of management experience as National’s VP of Financing/Analytics. Phil is also an excellent writer who's completed the Applied Business Analytics executive program at MIT and regularly contributes articles to National Business Capital’s blog.
Be first to know when new offers, rate changes, or seasonal funding trends hit.
By clicking Sign up now, I agree to the Terms and Conditions and Privacy Policy, which include our ability to contact you and send you promotional, educational and marketing materials.
