Looking to secure a large amount of funding for your business? You may be looking to buy commercial real estate or invest in a new phase of growth. Whichever the case, a $5 million business loan gives you enough capital to take on large projects and chase after even larger rewards.
Most business loans cap at $1 million to $5 million. Generally speaking, you’ll have to work with a bank, credit union, or non-bank lender to secure a loan amount of this size.
Some lenders offer $5 million loans through the government-backed Small Business Administration SBA 7a program. SBA loans can be a great financing option because of their low interest rates, but they’re also very difficult to qualify for. The application process is lengthy, rigorous, and notorious for low approval rates.
The good news is that there is more than one way to secure a $5 million business loan. From merchant cash advances to business lines of credit – we’ll go over all the options your business has for obtaining funds.
What Are the Benefits of Taking a $5 Million Business Loan?
$5 million isn’t pocket change; You can make significant investments with a loan of that caliber.
Using borrowed money over your cash flow offers many benefits to growing businesses. Here are a few of the most prominent:
- Greater purchasing power
- Streamlined cash flow
- Various financing options to choose from
- Liquidity to take advantage of opportunities on your schedule
- Potential tax benefits (on select financing programs)
- Ability to negotiate your contract to align with your business opportunity
Think of it like using a credit card in your personal life to afford a big purchase. Instead of using the funds in your bank account, you use borrowed money and manage the repayment over time, preserving your cash flow for a later date.
It works the same for a business. For example, if you have sizeable inventory expenses that leave you without working capital for a few days afterward, you can use a loan to cover that cost and keep cash in your business account for other opportunities and expenses.
Who Can Use a $5 Million Business Loan?
Any business can apply for a $5 million loan, but only those with strong financial backgrounds are approved for this amount of money. Generally, you’ll need 1+ year in business and ~$5 million in revenue unless you can offer collateral.
Here are a few of the many industries that can use a $5 million business loan and some ways we’ve seen them apply it in their businesses.
- eCommerce – Purchasing inventory in bulk and securing a discount from their supplier, maximizing their ROI heading into a busy season.
- Manufacturing – Investing in new machinery, staff, and training to increase efficiency and output.
- Construction – Combining a lump sum product with a line of credit to purchase upfront materials, hire staff, and maintain equipment with the utmost flexibility
- Medical – Purchasing a nearby competitor to corner their local market
- Restaurants – Expanding their dining area by purchasing the property next store and doubling the seating capacity
As a business owner, you need to dream big. If cash flow can’t support your growth plan, financing is an advantageous way to grow, scale, and outpace competitors on your schedule.
$5 Million Business Loan Options Explained
Explore a few financing options you can use to secure $5 million in capital.
| Type of Financing | Description |
| Business Term Loan | Business term loans provide a single, lump sum of capital you’ll pay back in installments over a designated time frame – typically 10 years to 25 years for loans of this size. Term loans feature fixed interest rates and predictable monthly payments.
These loans are ideal for one-time investments, such as real estate, machinery purchases, debt refinancing, and more. Keep in mind that lenders emphasize credit scores on business term loan applications. You may also be asked to provide collateral or, in some cases, make a down payment. The approval process with banks is also lengthy, ranging from several weeks to months, making them not a great option for businesses looking for funds fast. |
| Business Line of Credit | A business line of credit gives you access to a pool of funds you can withdraw from – up until the credit limit – as needs arise. With a $5 million credit line, you’ll have the option to use up all of it or just a smaller portion. This is a great solution if you don’t need the full $5 million or if you prefer flexibility.
Business lines of credit typically feature fixed interest rates. Payments can be made through fixed installments or monthly minimums – and you’ll only have to pay interest on what you’ve borrowed. With a revolving credit line, funds will become available as you make payments. This type of financing is ideal for ongoing purchases or for covering unexpected costs. Many businesses will even use them as an emergency fund. However, like term loans, business lines of credit can be difficult to qualify for – especially at a bank or credit union. |
| SBA 7(a) Loan | The Small Business Administration’s (SBA) most popular business loan caps at $5 million. With these loans, the government agrees to cover up to $3.75 million in case you default. This gives lenders additional security, which translates to lower interest rates for your business.
Nonetheless, SBA loans are some of the most difficult business loans to secure. You’ll have to meet the SBA’s strict eligibility requirements, and the application process can take months. |
| Invoice Financing | If outstanding invoices or late payments are an issue for your business, you may be able to use them to secure financing. Some lenders will accept unpaid invoices as collateral and grant you about 80% to 95% of the total value of your unpaid invoices. Instead of interest, you’ll typically be charged a flat fee, also known as a factor rate.
With invoice financing, you may be able to secure funds even if you don’t have excellent credit or strong revenue. And while funding can come fast, costs are usually higher with this type of business financing. |
| Revenue-Based Financing | With revenue-based financing, lenders give you an advance on your business’s future sales, typically in a lump sum. Instead of monthly payments, you’ll repay the funds via a percentage of your daily sales plus a fee. This financing option is popular among retailers and other brick-and-mortar businesses.
Lenders will emphasize your past sales history rather than your credit score. However, you will have to show that your sales are strong enough to qualify. Even then, the cost of this type of financing is typically higher than on business loans or credit lines. |
How Much Will a $5 Million Business Loan Cost?
Costs depend on your lender, the interest rate you qualify for, and the length of the loan term. Most $5 million business loan terms are between 10 to 25 years. The interest rate a lender will charge depends heavily on your credit score and other business financials – such as collateral and cash flow.
If your credit score is near the bare minimum of 700, expect to shell out more cash in interest than if your credit score was closer to 800.
As a whole, most lenders offer rates between 6% to 12%. SBA 7(a) loans generally feature the lowest rates, capping at 6%. However, there are also origination fees, which in some cases can be as high as 5% of the total funding amount.
Say you take out a $5 million loan at a 10-year term and secure an APR of 10%. Your monthly payments would come out to $66,075.37, and the total interest you’ll pay will total about $2,929,044.
Related: What is an Operating Line of Credit
Where to Get a $5 Million Business Loan?
You can secure $5 million in financing from banks, credit unions, and non-bank lenders. Banks and credit unions offer low interest rates but are notorious for rigorous eligibility requirements, while non-bank lenders are more accessible to businesses with higher rates.
| Type of Lender | Description |
| Banks and Credit Unions | Qualifications: 2+ years in business, at least $5+ million in annual revenue, collateral, and a 720+ FICO
Speed to Fund: 30 to 90 days Offered Programs: Standard financing, including term loans, lines of credit |
| Non-Bank Lenders | Qualifications: 1+ year in business, at least $5+ million in annual revenue, and a 600+ credit score
Speed to Fund: Days to weeks – potentially on the same day Offered Programs: Standard plus alternative financing options, like purchase order financing, revenue-based financing, and more. |
There’s no “best” type of lender for every business. The one that you should work with is the one where you can get exactly what you need on your timeline.
How Can I Qualify for a $5 Million Business Loan?
Qualifying for a $5 million business loan isn’t that much different than qualifying for other types of business financing. Criteria will ultimately boil down to your lender’s requirements. Some lenders tend to be more lenient than banks and credit unions.
At a minimum, banks and credit unions will generally need to see the following.
- Business credit score (at least 700)
- Business history (at least 3 years)
- Personal credit score (at least 700)
- Revenue
- Bank statements (i.e. the number of deposits, average daily balance, months ending balance)
- Entity type
- Industry
- Profit margins
- Cash flow
- Business plan
- Collateral
Keep in mind that even if you meet the lender’s minimum requirements, there’s no guarantee you’ll be approved. Securing large funding amounts can be difficult, especially because lenders want to minimize risk.
You’ll have to show that your business is financially capable of managing payments and paying back the loan. It’s also likely that lenders will want to see collateral, which can be real estate or another asset.
Fintech lenders and online lenders can be more flexible. They usually offer a larger array of financing products for different businesses in various situations. It’s even possible for some businesses to secure funds with lower credit scores or shorter business history.
How to Apply for a $5 Million Business Loan?
Once you’ve researched lenders and know that you qualify, you’ll submit an application and wait for a response. Banks and credit unions take anywhere from 30 to 90 days to process your application, whereas non-bank lenders can return a decision the same day.
Here’s a breakdown of the application process with most lenders.
- Sending an Application – You’ll provide all the relevant information and submit a formal application to the lender.
- Reviewing Approvals – Once you’ve received decisions, you’ll review the contracts and compare them against one another to find the best one
- Negotiating Terms – The first offer likely isn’t the best you qualify for. You can negotiate the terms with your lender, but remember that pushing too hard can leave you without an offer
- Securing Funds – After you and your lender have come to an agreement, you can finalize your contract and receive your funding. This should happen within a few hours, if not instantly!
At National Business Capital, we make this process as simple and painless as possible. Instead of doing all of this on your own, our Business Finance Advisors find the lenders your business qualifies with and submit an application on your behalf.
We don’t apply you to 75 lenders. Instead, we find the ones that are most likely to yield the most competitive offers and apply only to them. There are no hard credit checks, either, so you’re credit is safe!
Bottom Line
Securing a business loan as large as $5 million doesn’t come easily – but you do have options. If you have a strong credit score with sound financials and are willing to wait weeks to months – working with a bank or credit union might be an option.
On the other hand, if you prefer to have your funds sooner rather than later or need more flexibility when it comes to requirements, a fintech lender may be better.
In this case, make sure to check out National. We’re a Specialty Finance Group with exclusive lender relationships, where you can get offers you can’t get anywhere else and choose the best financing solution based on your business qualifications.
Learn more by filling out our 60-second application!
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Frequently Asked Questions
What Is the Typical Interest Rate for a $5 Million Business Loan?
The interest rate you receive will depend on a variety of factors. Here are a few of the most prominent:
- The financial background of your business
- The lender you’re working with
- The term of your loan
- The economic conditions surrounding your transaction
Interest rates are generally lower at banks and higher at non-bank lenders, but the speed and accessibility of non-bank options often outweigh the slightly higher cost of capital. If you’re looking to get the best rate, make sure to apply with multiple lenders and compare your approvals.
How Long Does It Take to Get Approved for a $5 Million Small Business Loan?
Banks take anywhere from 30 to 90 days to submit decisions on incoming applications, whereas non-bank lenders can render an approval almost instantly – if you qualify. Keep in mind that errors in your application can unnecessarily delay this process. Read over the documents you submit more than once to ensure everything is accurate and honest.
What Are the Repayment Terms for a $5 Million Business Loan?
Like most financing products, you can tailor the repayment term to your opportunity. If your growth plan will pay off in the short term, you can opt for a shorter repayment period and vice versa.
Remember that a lower interest rate on a longer schedule costs more than a higher interest rate on a shorter schedule. Although the interest rate on your short term financing may seem overwhelming at first, you’ll likely pay less than a business that secures a $5 million loan over a longer schedule.
Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.
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Phil Fernandes
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.
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