Whether you’re looking to cover a short-term supply purchase or you’re financing a long-term expansion, there’s a business loan that can help you through it. You likely already have a specific number in mind, but you’re not exactly sure if you’ll get approved for it. 

When setting your company up for success, choosing the right type of loan is essential to getting the funding amount you need. We’ll go over each factor your loan amount depends on along with the types of loans that will work best for your needs.

How Much Do Different Types of Business Loans Offer

Whether you go to a bank or other financial institution for a small business loan, you should know that all loans are not built the same. The type of loan you get is determined by what the funds are used for, your business credit scores, and several other factors. 

SBA Loans

The Small Business Administration (SBA) has several types of loans that are built to help small businesses obtain affordable financing. This type of financing is typically offered by traditional financial institutions and is backed by the SBA to reduce risk to the lender.

There are different SBA loans for every type of business purpose. They include:

• SBA Microloan
• SBA 7(a) loan 
• SBA 504 loan
• Community Advantage
• SBA Export Express Loan
• Economic Injury Disaster Loan (EIDL)

Depending on which loan you choose, you can get anywhere from $500 to $5.5 million in small business financing through the SBA. Each of these loans has different requirements and standards to meet which are often much more than a regular loan. 

The lower interest rates and ample repayment terms make the extra requirements worth it. With this government-backed funding, you’ll need to come prepared with excellent financials, a good credit score, and a solid business plan to qualify for higher loan amounts.

Bank Loans

Bank loans are a traditional form of financing that often has the lowest rates and some of the best repayment terms. You could go through a large national bank, a regional bank, or a credit union. 

Bank loans will typically approve over $1 million in business financing depending on which bank you work with. Large national banks may not have a limit on their business loans since they have more access to capital. 

Regional banks and credit unions typically have smaller loan caps and are better for short-term or medium-term financing needs.

According to the most recent information from the Federal Reserve, the average loan amounts for bank loans are as follows: 

Average Loan Amount by Lender

Type of Lender	Average Loan Amount
Large National Banks	$593,000
Regional Banks	$146,000

Source: https://www.federalreserve.gov/releases/e2/current/default.htm

Equipment and Invoice Financing

Equipment and invoice financing depend on using assets to secure financing similar to how a house secures a mortgage. The equipment used is typically very large and is used as a main component of the business. Equipment loans are usually issued for up to $500,000. 

For invoice financing, you’re essentially leveraging your unpaid invoices as collateral for a small loan. Financing companies that do invoice factoring usually lend about 80%-95% of the total invoice amount. 

Business Lines of Credit

Business lines are useful for short-term and some medium-term borrowing needs. These revolving lines of credit can be borrowed against and repaid. It allows you to continue borrowing and repaying the credit line as many times as needed without applying for another loan. 

Most lines of credit are issued for up to $100,000. However, the SBA has a business credit line program called SBA CAPlines that issues credit lines of up to $5 million.

Online Loans

If you’ve tried the other options and haven’t qualified for a business loan through traditional banks, then it’s time to try an alternative lender. 

Online lenders have a much higher approval rate compared to banks. Their approval rates are about 80% in the latest study from the Federal Reserve. Even though they have higher approvals, they still offer sizable loan amounts. 

Loan amounts through online lenders range from $5,000 to $200,000 on average. Many online lenders have more relaxed credit requirements which makes them a good financing option for business owners with bad credit. 

Their interest rates are often higher than traditional lenders, which will impact your monthly payment. However, the web is a big marketplace. So you can easily compare multiple online lenders to get the best interest rate for your business loan. 

The Factors That Affect How Much You Can Borrow

Once you decide which small business loan is best for your company, there’s still the matter of the total loan amount. Even when you get approved for a business loan, there are still factors that impact the amount of funding you’ll qualify for. 

Some of these factors are completely within your control, while others are not. 

The Lender

The lender you decide to put your loan application in with plays a big role in how much you’re approved to borrow. If you decide to go with a large national bank, you’ll likely be approved for much more than a credit union as long as you meet their credit standards. 

Since each lender has its own set of credit and revenue requirements, the amount you get approved for at one lender might be higher than what you’d find at another. Choosing a lender you already have a relationship with can also affect your loan amount.

Access To Collateral

If you’re looking for a large loan amount to fund your business, then banks may ask for business or personal collateral to secure the loan. This reduces the risk associated with lending out large amounts. 

If your business defaults on the loan payments, the bank can seize the assets securing the loan and liquidate them to recoup at least part of the loan proceeds. The collateral used to secure a business loan could be–

• Commercial property
• Heavy equipment used for the business
• Cars or vehicles
• Personal property
• Overdue invoices

Using collateral to get a secured loan will help you qualify for much higher loan amounts than an unsecured loan. Since the bank is taking on less risk, they’re willing to lend more money.

Income and Expenses

Any type of financing you gain will consider both your business credit and your business finances. These factors allow lenders to get a full understanding of how likely you are to repay the loan and the loan amount you qualify for. 

When analyzing your business finances, lenders look for several things:

• Annual revenues
• Credit scores
• Profits and losses
• Cash flow
• Business credit history
• Debt Service Coverage Ratio (DSCR) 

Your annual revenues, DSCR, cash flows, and profit & loss statements tell them how much of a monthly payment you can afford even when business gets slow.

Loan Purposes

Some loans can be used for very specific purposes, but not others. This is especially true with SBA loans. They’re known to be strict on what purpose their loans can be used for. 

You’ll notice the maximum loan amount for some loans is much higher because of the purpose associated with it. For example, SBA loans for exporters have a cap of $500,000 while their EIDL program caps out at $2 million.

Business and Personal Credit

When analyzing a business loan application, one of the first things the lender looks for is the business credit score and the personal credit score. Banks and lenders are concerned with your credit because it’s a record of how well your business meets its existing payment obligations.  

Your personal credit is also considered because how someone manages their personal finances is often an accurate measure of how they manage their business finances. When you have a stellar credit report, you’ll qualify for the best small business loans with higher amounts. 

Current Debts

Lenders want to know that you’ll be able to afford the monthly payments on their loan for the full length of the loan term. This means, in addition to your revenues, they’ll also consider your current debts and how much of your revenue that takes up.

This includes business credit cards, loans, and other types of business financing. With the new loan, you should comfortably be able to meet your current monthly debt obligations plus the new monthly payment. 

How To Qualify For More

There are several ways you can turn the tables in your favor and get the financing amount you’re looking for. The key to all of these tips is that they lower how much risk the lender is absorbing which makes them more likely to increase your funding.

Raise Your Credit Score

Credit scores are a big determining factor in how much you get approved for because it tells lenders how responsible you are with the credit you already have. A high credit score represents less risk for the lender so you’ll be approved for more. 

A simple way to raise your credit score is with CreditStrong’s business credit builder loan. Build up to $10,000 of business credit with plans that can fit your budget. There’s no hard inquiry to see if you qualify. Get started building business credit today with just your EIN.

Pay Off Debt

One sure-fire way to qualify for more is to pay off your debts. Not only will this help raise your credit score in the long term, but it’ll also raise your business’s capacity to take on new debt. You can start by tackling your higher interest debt first or paying down your largest balance. 

Make a Down Payment

Making a down payment on your loan is almost like making it a secured loan. It lowers the risk for the lender and shows them that you’re serious about getting the funding for your business. The larger the down payment is, the more you’ll be able to qualify for. 

Use Collateral

Putting up collateral to secure the loan makes it easier for the bank to say yes to a larger loan amount. You could leverage commercial property, heavy equipment, or even personal property to secure the loan. 

Just be aware that not paying the loan back as planned may result in the seizure of that collateral. 

Work With a Lender You Know

If you already have a business checking account or a business credit card in good standing with a lender, you may have a better chance of getting approved for more. You’re more likely to have credit extended to you by a lender that knows your business and has a history with you.

Overall, finding financing for your business requires you to consider the type of loan, which lender to get it from, and whether you want to use collateral. These have major effects on the total amount of credit the lender decides to extend to you. 

By choosing the right type of loan, and the right lender, your business can get the funding it needs. To get the highest credit limits, best loan terms, and lowest interest rates, keep your debts low and maintain good to excellent credit. 

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