Applying for a personal or business loan might make you a little anxious, especially if you’ve never done it before. Applying for a million-dollar loan is an entirely different story. The qualification criteria are more stringent than for smaller loans, and it’s easy to become intimidated at the thought of applying for a loan this size. If you’re wondering how to get a million-dollar loan, here’s where to start.
⚠️ Lenders won’t just toss a million to anyone who wants it. You will have to qualify, and you can expect the process to be stringent.
How to Get a Million-Dollar Business Loan
It’s certainly possible to get a million-dollar loan for your business, but you must have significant documentation to qualify. If you’re wondering how to qualify for a $1 million-dollar business loan, start by gathering the following:
- Tax returns (both business and personal)
- Building lease
- Business plan
- Business license(s)
- Articles of incorporation
- Bank statements (both personal and business)
- Financial statements
- Profit and loss statements
- A plan for how you will use the loan
Different lenders may require more or fewer documents. Make sure to check with your potential lender before you apply.
Most lenders require you to have been in business for a certain length of time before giving you a loan, especially a large loan. So if you’re trying to get money to start a business, a million-dollar business loan probably isn’t the best option!
Bank Loans
Banks often offer business loans of $1 million to $5 million. But they understandably won’t give these loans to just anyone. The criteria for bank loans tend to be very strict. The exact qualifications will vary by bank, but here are some common criteria:
- You must have an established business.
- Your business must have a good financial track record.
- Your business must have an annual income of around $180,000 or more.
- Your business must have a low debt-to-income ratio.
- You must have a good business credit score.
- You must have a good personal credit score.
What credit score do you need for a million-dollar loan? Business credit scores work differently than personal scores do. Instead of going from 300-850, business scores go from 0-100. Most lenders use these ranges to determine the category of your business score:
- Bad: 0-49
- Fair: 50-79
- Good: 80-100
Generally speaking, your personal FICO® credit score should be at least 650, but some lenders prefer it to be 700 or above.
Some banks will require your loan to be secured, meaning you’ll use something of value (like commercial real estate) as collateral. However, that’s not always the case.
Online Lenders
Many online lenders only offer smaller loans, but some offer business loans of $1 million or more. The criteria for these loans can be quite stringent as well (though generally less so than bank loans).
Many online lenders require you to have been in business for a year or two. They typically have requirements for annual income (usually $100,000 or more) and also require you to have a business bank account.
In some cases, online lenders may require collateral, usually in the form of buildings or real estate. That way, if you default on the loan, the lender can recoup some of the costs by selling your property.
If you haven’t been in business for very long or have a lower credit score, you’re more likely to be able to get a loan from an online lender than a bank. But before you accept a loan offer, you should make sure you can afford to pay it back.
🤔 What is the monthly payment on a 1 million dollar business loan? You can expect to pay about $4,500 a month, depending on the loan term, interest rate, and other factors.
Business Line of Credit
A business line of credit is different from a business loan. With a loan, you get a lump sum of money and pay it back (plus interest) in installments. A line of credit works like a credit card. You can draw funds as you need them, and you only pay interest on the funds you’ve withdrawn.
Business lines of credit are usually offered by both banks and online lenders. The criteria are similar to the criteria for a business loan. And just like with bank loans, it’s often slightly easier to get a million-dollar credit line from an online lender than from a bank.
How to Get a Million-Dollar Loan for Real Estate
If you’re hoping to get a million dollars to buy real estate for your business, you’ll find that the application process is slightly different. You can still apply for mortgages at banks and with online lenders, but lenders will look closely at your personal finances.
As with any loan, your lender will also take a look at your personal and business credit score. For smaller loans, most lenders want you to have a personal FICO® score of at least 620. But for a larger real estate loan, most lenders (especially banks) will want you to have a score of at least 740. In some cases, a higher income or larger down payment may make up for a lower score.
Lenders will also assess what’s called a debt-to-service ratio. This ratio looks at the relationship between your net operating income (NOI) and what you’ll spend each year to pay back the loan. That ratio normally needs to be at least 1.25.
Let’s say your NOI is $150,000 per year, and your total loan payments will be $100,000 per year. When you divide $150,000 by $100,000, you get a ratio of 1.5. In this case, you’re more likely to get approved by your lender.
If you’re hoping to get a million-dollar real estate loan, you generally have two options: banks and private lenders. It’s harder to get approved by a bank, but you’ll usually get a lower rate and may qualify for a longer loan term if necessary. Private lenders approve more people, but you may have to pay a higher rate.
Can I Get a Million-Dollar Personal Loan?
Generally, you can’t. The largest generally available personal loans are around $100,000, although many lenders cap their personal loans at $40,000-50,000[1].
That doesn’t mean everyone who wants a $50,000 personal loan can get one, of course. Personal loan amounts are limited by your income, credit score, whether your loan is secured or unsecured, and whether you have a co-signer.
Most lenders require a minimum FICO® score of 650 to qualify for a personal loan. You may be able to qualify if your score is lower, but your loan may have a high interest rate. If you’re having trouble qualifying for a loan, choosing an asset to use as collateral or asking someone to co-sign your loan may improve your chances.
💡 If you need to take out a small loan, you can sometimes use a personal loan for business financing. This may be an option if you can’t otherwise qualify for a business loan.
Can I Get a Million-Dollar Mortgage
The simple answer is “Yes, if you qualify”. Many lenders offer Jumbo and Super Jumbo mortgages – that term refers to mortgages that exceed the FHA conforming limit for a given area – that may reach well into the tens of millions of dollars.
These loans aren’t easy to get. You will need impeccable credit, a large and secure income, a flawless debt-to-income ratio, and more.
Can you qualify for a million-dollar mortgage? Think of the quote from J.P. Morgan: “If you have to ask the price, you can’t afford it”. Million-dollar mortgages work the same way. If you have to ask whether you qualify, you probably don’t.
Securing the Funding Your Business Needs
Initiating the process of applying for a million-dollar loan can be intimidating. But in some cases, that loan is exactly what your business needs to thrive.
The key to getting the right funding is to be thorough and methodical. You’ll need ample documentation (and sometimes collateral) to show the lender you’re a good candidate.
However, you should also be sizing up the lender during the process. Look at the interest rate and the length of the repayment term. Ideally, you’ll find a million-dollar loan with a repayment plan your business can comfortably afford.
