How to Get a 100k Business Loan (2024)

If you're wondering how to get a $100,000 business loan – it could be easier than you may think. Whether you've secured financing before, or this is your first time obtaining funding, we'll guide you through the steps to secure the capital you need to grow your business.

Best Business Loan Brokers

1. Llama Loan – they offer some of the best business loans with affordable rates and the most favorable terms. We highly recommend them for all of your business financing needs because of the easy application process and speed of funding.
2. Lendio – can be more expensive.
3. LendingTree – more cumbersome application process.

Types of Financing That Offer $100k in Funding

Merchant Cash Advance

A merchant cash advance, or MCA, provides upfront financing by using your card sales as a form of collateral to back your funding. You'll receive a lump sum, with repayment tied to your business revenue. In exchange, you'll pay a factoring fee that typically lies between 1.2 and 1.4 times the total financing amount. MCAs are known for ease of access and quick funding but they are one of the less affordable types of financing.

One of the biggest benefits of an MCA is the more lenient approval process. Because your sales are prioritized in the approval process, your credit score takes a back seat which can open the door to borrowers who may otherwise not qualify.

Business Term Loans

Business term loans are a conventional financing option provided by banks, credit unions, and online lenders. You receive a lump sum with a predetermined repayment schedule over a set term. When compared to an MCA, a business term loan will be more difficult to get approved for, but they can be more affordable. You may also need a down payment and collateral, depending on your lender and business.

SBA Loans

SBA loans can be among the most affordable type of business financing you can find, but there are some downsides to consider. They have strict eligibility requirements and an extended application and approval process which can take weeks or months in some cases.

On the upside, SBA loans offer competitive interest rates and longer repayment terms which can be beneficial for your business's cash flow.

Business Lines of Credit

Business lines of credit offer flexibility, allowing you to borrow up to a predetermined credit limit and only pay interest on the amount used. Your credit score and business performance will influence your eligibility and rates so be sure that these are in line before applying. This type of business financing is particularly suitable for businesses that face seasonal fluctuations or those in need of emergency capital. Establishing a line of credit in advance gives your business a safety net without the commitment of a longer term loan.

Invoice Factoring

Invoice factoring, also known as accounts receivable financing, works by turning your outstanding invoices into immediate cash. A factor rate will ultimately determine the cost of borrowing against these invoices so be sure to shop around to find the best rates available. This can be a valuable option for managing cash flow, especially if you're working with reliable customers who may pay slowly.

Equipment Financing

If you need a small business loan and you're looking to purchase equipment – equipment financing could be the best solution for your business. The equipment itself often serves as collateral, reducing the risk for the lender and potentially leading to more favorable interest rates. Loan amounts depend on the price of the equipment and terms are typically defined by its expected lifespan but in some cases you can secure over $100,000 in financing.

What You'll Need to Secure a $100k Business Loan

When you're looking to secure a business loan of $100,000, there are several key documents and financial metrics you'll need to have at the ready. Your personal credit score and your business credit scores are foundational to the application process for most types of financing. Lenders will use these as indicators of your financial responsibility and your business's track record but this isn't always the case.

For example, merchant cash advances do not require exceptional credit scores to get approved. In most cases, you'll need a minimum credit score of 650, but this will vary from lender to lender.

Next, a detailed business plan is crucial. This plan should outline your business model, market analysis, and strategic plans for growth so you can justify your financing needs to your lender.

Once you've outlined your business plan, your lender will require an assortment of financial documents. These include your cash flow statements, income statements, balance sheets, and more.

The documentation doesn't end there. Tax returns, bank statements, and legal documents such as articles of incorporation are often necessary to prove the history and legitimacy of your business.

If you're a startup or you've been in business for less than two years, it may be more challenging to secure a $100k loan, as lenders typically look for a track record of stability and profitability. However, if your business is showing signs of significant revenue growth, you may still qualify depending on the type of financing.

Lastly, collateral might be required to secure the loan. Not all types of financing will require collateral. For example, if you opt for an unsecured loan, you won't need additional collateral – but your rates and terms may not be as favorable. For a secured business loan, you will need collateral to back your financing but you'll secure better rates and terms.

Average Interest Rates for a $100k Business Loan

When you're considering a $100,000 business loan, understanding the average interest rates can help you anticipate your costs. Rates can vary widely based on factors like your creditworthiness, the type of lender, and the nature of the loan.

• Traditional Bank Loans: Interest rates at traditional banks generally range from 6% to 20%+. If you have a strong credit history and a well-established business, you might access rates on the lower end.
• SBA Loans If you qualify for a loan from the Small Business Administration (SBA), your interest rates may be lower. SBA loan interest rates typically vary from 8.5% to 15%.

Keep in mind that these rates are not fixed. They are influenced by economic conditions, central bank policies, and your specific business financials.

Your credit score is a significant determinant of the interest rate you'll receive. Higher scores often unlock lower rates. Similarly, a longer time in business and strong annual revenues can lead to more favorable terms.

Always compare offers from various lenders to ensure you find the most competitive rates. A difference of even a small percentage can mean a lot in terms of repayment over the lifetime of the loan.

How to Get a $100,000 Business Loan

1. Consider Your Funding Needs

First, you'll want to evaluate why you need the loan. Whether it's for inventory, equipment, or expanding your business footprint, obvious justification for the loan amount is crucial. Lenders will review your intention for the funds, ensuring they align with business growth. This step not only solidifies your own understanding of your financial needs but also builds a strong case for your loan application.

2. Gather All of Your Documents

Next, you will need all of your comprehensive financial statements including bank statements, tax returns, and legal documents, such as your articles of incorporation. Additionally, you'll prepare a detailed business plan that outlines your business strategy, market analysis, and financial projections. This plan will serve as a roadmap for lenders to understand your business's potential for success and ability to repay the loan.

3. Fill Out the Application

Detailed attention to your loan application is vital during the application process. You'll want to ensure every section is completed with accuracy to avoid any unnecessary delays. Any ambiguity can be a reason for lenders to pause the review process, so clarity is key.

4. Speak to a Rep

Once your application is submitted, communicating with a loan officer can provide valuable insights. They can assist you with understanding the finer details, like interest rates, loan terms, and monthly payments, to help you determine if the loan offer suits your needs.

5. Receive Approval

The approval process for a $100,000 business loan can vary significantly among traditional banks, online lenders, and credit unions, with timelines ranging from a few days to several weeks or months. Staying proactive and in constant communication with your lender is key to smoothly navigating this phase.

Upon receiving approval, it's essential to review the loan agreement. This document outlines not only the repayment terms and interest rates but also any covenants or conditions tied to the loan. Understanding every aspect of this agreement is crucial, as it ensures you are fully aware of your obligations and the implications of any terms. Don't hesitate to ask your lender for clarification on any points that seem unclear or consult with a financial advisor.

What are the typical monthly payments for a $100,000 business loan?

The monthly payments for a $100,000 business loan are influenced by the loan's interest rate, term length, and the borrower's creditworthiness. A lower annual percentage rate (APR) — which includes both the interest rate and any additional fees — can reduce the cost of borrowing. For instance, with a 7% APR over a five-year term, the monthly payment would be around $1,980.

Extending the loan term can decrease monthly payments but increase the total interest paid over the life of the loan. For example, a 10-year term reduces the monthly payment compared to a 5-year term, but the total interest cost will be higher.

Your business's financial health impacts your loan terms. A strong credit score and solid financial records can lead to better loan conditions, potentially lowering your monthly payments.

Online calculators offer a practical way to estimate your monthly payments based on different APRs and loan terms. While these tools provide a ballpark figure, your lender will determine the final terms.

Ultimately, the monthly payment on a $100,000 business loan depends on a combination of the loan's terms and your financial standing. It's wise to shop around and use calculators to estimate your payments before making a decision.

Can I Get a $100k Business Loan with Bad Credit?

Obtaining a $100,000 business loan with bad credit poses challenges but remains within the realm of possibility. Lenders assess creditworthiness to minimize their risk, often associating lower credit scores with higher risk. This assessment can result in stricter lending conditions or elevated interest rates for those with suboptimal credit.

Credit scores significantly influence loan approval processes. While traditional banks typically look for scores above 600, alternative lenders might offer more leniency, evaluating other aspects such as business revenue and growth prospects.

To enhance your loan application, demonstrate financial stability by presenting clear evidence of robust monthly or annual revenues. This shows your business can support loan repayments. Also, craft a compelling business plan that outlines your business's strengths and detailed plans for using the loan to boost revenue, offsetting concerns about credit history. Offering assets as security can make lenders more inclined to approve your loan, even with a lower credit score. Additionally, investigate non-traditional funding routes like crowdfunding, which may offer more flexible eligibility criteria.

Improving your credit score should be a continuous goal. Enhanced credit can unlock access to larger loans and more favorable terms in the future. Despite the hurdles, a strategic approach combining clear financial planning with an exploration of diverse lending sources can pave the way to securing a $100k business loan, even with bad credit.

How Long Does It Take To Get Approved For A $100k Business Loan?

The timeline for approval on a $100,000 business loan can vary widely based on several factors, including the type of lender, the complexity of your loan application, and your business's financial health.

Traditional banks often have a more prolonged evaluation process, which can take several weeks to a few months. This is due to their thorough review of financial statements, business plans, and credit checks. In contrast, online lenders, known for their agility, may streamline the process significantly, offering decisions within a few days to a week.

How to Use Your Business Loan

Wondering how to use your business loan? Here are a few ideas.

First, consider using the loan to invest in opportunities that will expand your business and increase revenue. This could be purchasing new equipment to enhance productivity, expanding your product line, or entering new markets. Investments that have a direct impact on your revenue generation capabilities can provide the best return on investment.

Next, think about methods of improving operational efficiency. This can significantly reduce costs and increase profit margins. You can use part of your loan to upgrade technology, streamline processes, or train staff. Investing in software that automates tasks or improves customer service can pay dividends in the long run.

Additionally, a portion of your loan can be effectively used to bolster marketing efforts. Whether it's digital marketing, launching a new website, or investing in branding, effective marketing can attract new customers and retain existing ones. Consider which marketing strategies align best with your target audience and business goals.

Finally, while it's tempting to invest the entire loan in growth, it's wise to set aside a portion as a financial cushion. This emergency fund can cover unexpected expenses, helping you manage cash flow fluctuations without disrupting your business operations.

Final Thoughts

Securing a $100,000 business loan is a significant step that requires careful preparation. By thoroughly evaluating your business's needs, preparing all necessary documents, and choosing the right lender, you'll position yourself for a successful loan application.

Remember, each lender has unique requirements and timelines, so it’s essential to research and select one that aligns with your business goals and financial situation. Ultimately, a well-planned approach not only enhances your chances of approval but also ensures that the loan serves its intended purpose in fueling your business's growth and success.

This article was written in cooperation with Ride On Technologies LLC