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Blog Types of Loans
Jun 24, 2024
5 min read
Last update: Jun 24, 2024

Unlock Your Business Potential: How Much Loan Can You Get?

Working capital is like a good wrench. It moves the levers of business, putting you in a position to capture more customers or produce better products and services. Like other trade tools, you can borrow that capital in the form of a loan.

Businesses rely on loans for many reasons, from startup funding and expanding operations to meeting cash flow needs and purchasing real estate. Still, knowing exactly how much capital you qualify for can be challenging, making these uses more a dream than a reality.

Luckily, SBG Funding put together this guide so that entrepreneurs and small business owners can better understand their funding options and amounts. We even have a tool to help you find the exact number, streamlining the borrowing process! 

What Determines Your Business Loan Capacity?

The threshold for businesses to qualify for lending solutions is much lower than in previous generations. And the loan requirements are more cut-and-dry, allowing more companies to set themselves up for business financing. 

Lenders want to reduce their risk whenever lending capital. Because of that desire, they’ll look at your credit history, including personal credit scores and previous loans. They’ll also want to see a snapshot of your current business health, such as bank statements or P&L reports. 

Some lenders will even want to see your plan for the future, such as your business plan. Business owners who can articulate how they plan to use lent capital will be more successful in securing that cash. 

An online lender, such as SBG Funding, expects a business to meet the following minimum criteria:

  • A personal or business FICO score of at least 650
  • Profitable operations or revenue of at least $350,000 annually
  • Verifiable tenure of at least six months in business

It’s important to remember that certain industries and business types are too risky for many lenders. SBG Funding is happy to work with business owners operating in manufacturing, restaurants, retail, or construction. 

Navigating Through Business Loan Types

Not all lending types are equal. While traditional bank loans are what the mind jumps to when considering business loans, you could benefit from a different loan option. Here’s a look at a few common loan types:

  • Traditional term loan – The standard lump sum loan from a bank, credit union, or online provider. Lenders set fixed monthly repayment terms and interest rates. Any additional funds will require separate loan applications, and larger loan amounts may require collateral.
  • Business Line of Credit (LoC) – Lenders approve access to funds up to a pre-determined limit. A LoC is more flexible, allowing businesses to draw cash as needed and only requiring monthly payments on borrowed amounts. It’s an ideal on-demand, revolving credit option that doesn’t require repeated approval. 
  • SBA loans – Lending backed by the U.S. Small Business Administration, which federally guarantees lump-sum amounts up to $5 million. There are various classifications, including the SBA 7(a), 504, Microloan, and CAPline, each fulfilling different needs and bearing different requirements. 
  • Equipment financing – Loans designed explicitly for purchasing or maintaining operational equipment. Amounts are smaller than traditional term loans but often carry favorable repayment terms. Some lenders may use purchased equipment as collateral.
  • Invoice factoring – Receive lump-sum working capital with funds borrowed against unpaid invoices. Invoice financing is an excellent option for businesses with longer payment cycles, giving owners access to cash when needed.  
  • Business Credit Card – A revolving lending solution with a pre-fixed max spending limit. Business owners make payments on outstanding balances. Credit cards are great for flexible spending but have lower limits than loans and less favorable repayment terms. They’re also not loans in the traditional sense, which might not be ideal for some businesses.     

Plenty of alternative lending solutions exist, like the merchant cash advance or bridge capital, giving you more financing options to secure your business’s funding. The specific amount lenders are willing to provide will depend on your risk profile as a borrower. 

How Much Can Businesses Really Get? 

Now that you have some background on the criteria and types of business loans available, we can get to the nitty-gritty—the amount your company can actually get. According to the Federal Reserve, the average small business loan is about $663,000, but there are a few things to keep in mind:

  1. Lenders avoid providing loans exceeding 30% of a business’s annual revenue.
  2. Loans can range from $1,000 to $5 million, depending on the type, term, and borrower.
  3. SBG Funding’s Funding Calculator is the perfect tool to determine how much you need.

Owners can use their funds for any number of operational needs, including:

  • Business expansions – Opening another location or adding on to your existing property. For example, a second restaurant location could have a total cost of $400,000 or more, depending on the area and concept. 
  • New equipment or repairs – A broken excavator holds up project progress, costing you time and money. Expect to spend at least $80,000 on a new full-sized model. Dozers aren’t much cheaper at $40,000. 
  • Consolidate debt – Make your accountant happy by streamlining your outstanding debt with a consolidated loan. This process can save money on total interest and make loan payments more manageable. 
  • Cover expenses – Seasonal dips affect businesses in all industries, but a business loan provides a reserve to keep cash flow consistent. Bank of America recommends that you have at least 10% of your annual revenue saved in an emergency fund, and a loan can help establish that reserve. 
  • Acquiring another business – Use loan funds to make strategic business investments, like acquiring a competitor, investing a stake in a supplier, or purchasing a subsidiary. Term and SBA loans are perfect for this purpose.

Regardless of what you need capital for, SBG Funding makes the process easy, thanks to an online application and next-day deposits. Apply today for your next small business loan with SBG Funding! 

Strategies to Maximize Your Loan Potential

A loan is a powerful business tool that provides the funds needed to make strategic moves. However, mismanagement of those funds can lead to dire consequences, such as repossessions, bad credit, and collection notices.

Following a few tips can help you avoid those scenarios and maximize your borrowing potential. 

  1. Don’t become tempted to borrow more than you need; create a business case for the funds you’re borrowing. 
  2. Work on your personal and business credit scores. Aim for a 700 FICO or higher for lower interest rates.
  3. Improve your Debt Service Coverage Ratio (DSCR), which is your current debt-to-revenue ratio. Stay close to 2.0 for ideal lending conditions.
  4. Offer collateral for significant business loan amounts. Many banks will require one, but SBG Funding doesn’t. 
  5. Produce a comprehensive business plan to prove your expertise. 
  6. Use short-term loans or wait to apply for loans until you have more business tenure.
  7. Partner with an accounting professional to organize your P&L, balance sheets, and cash flow statements. Clear documentation solidifies your business case.

Lenders provide the most favorable terms to borrowers capable of managing their business properly. Positioning yourself as a successful company through business plans, organized financials, and a healthy DSCR reduces risk to lenders.

Aligning Loan Amounts with Business Needs

Before applying for a business loan, dialing in the amount borrowed is crucial. Overborrowing can produce huge payments and dead capital, while underborrowing could lead to cash shortfalls, additional lending applications, and damage to your credit. 

In addition to using SBG Funding’s business loan calculator, partner with industry experts and network with other owners to help build your budget and business case. Accurate estimates should be a part of your business plan.  

Seize Your Financial Future with SBG Funding

Ultimately, the amount of a business loan you have eligibility for depends on your revenue, financial picture, business plan, and length of tenure. Understanding your approval amounts gives you a better idea of what you can strategically do with that capital.

Whether you need a loan to meet cash flow shortfalls, expand operations, or acquire another business, SBG Funding has a solution for you. Unlike other financial institutions, SBG Funding is an alternative lender that supports business owners with a simplified online application process and rapid access to cash.

Use our funding calculator and apply for your ideal loan today to see funds as soon as tomorrow! 

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If you can’t hang on then give us a call at (844) 284-2725 or complete your working capital application here.

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