Do you need a large influx of cash for your business? Whether it’s to make a sizable one-time purchase, expand operations, capitalize on an investment opportunity or for some other purposes, a $100,000 business loan can help meet your funding needs. You could also use the loan proceeds to cover operating expenses, hire more employees, smooth out cash flow or start a new company from scratch.
Here’s what you need to know about taking out a business loan for this amount, what options are available and where to find the best lenders.
Is It Hard to Get a 100K Business Loan?
It can be challenging to get a $100k business loan. However, it’s not impossible if your company is in good financial health and meets the lender’s eligibility guidelines. More on the latter shortly.
Getting a 100K Business Loan from Traditional vs. Alternative Lenders
Traditional lenders generally have stringent requirements to qualify for a $100k business loan. However, you may find alternative lenders that are more lenient and offer faster funding times. Remember that flexibility and convenience often come at a cost in the form of steeper interest rates and lending fees.
Keep in mind that the cost of borrowing isn’t as significant if you invest the funds in revenue-driving opportunities that offset the amount you pay in interest. For example, if you are paying $15k in interest but now have an additional truck on the road that generates $5k monthly, the revenue offsets some of the interest.
Can a Startup Get a 100K Business Loan?
Startup companies aren’t necessarily ineligible for $100k business loans. However, most traditional lenders have a minimum time in business and annual revenue requirements, making qualifying quite difficult for some business owners. That said, an alternative lender could be a more viable option for startups seeking larger loan amounts.
What Does It Take to Get A 100K Business Loan?
Before applying for a $100k business loan, familiarize yourself with lending guidelines. Each lender is different, but you’ll generally need the following to qualify for funding:
Most lenders prefer borrowers with good or excellent personal credit – typically 670 or higher. A lower credit score doesn’t automatically mean you’re ineligible for funding. However, you’ll likely get a higher interest rate and pay steeper fees to borrow funds if approved for a $100k business loan.
You’ll also need to operate a business that’s eligible for funding with the lender. Keep in mind that companies in high-risk industries could be eligible for financing. Still, the borrowing costs could be substantially higher to offset risk. The lender may also require some form of collateral to approve you for a loan.
Traditional lenders generally require at least two years in business to consider you for a loan. But if you apply with an online lender, you could secure funding with just six months in business, assuming you meet the credit score and revenue requirements. Some alternative lenders also offer loans to startups.
Cash Flow and Revenue
Lenders want reassurance you can afford to make timely loan payments. So, most have minimum annual revenue requirements. Your company should also be in good financial health to have the best chance of getting approved for a $100k business loan.
As mentioned above, a lower credit score or other shortcomings could mean you need collateral to get a $100k business loan.
Other Financial and Business Documents
Prepare to submit financial and business documents when you apply for funding. Here’s what to have handy:
- Two most recent personal and business tax returns
- Three most recent bank statements
- Business licenses and permits (if applicable)
- Articles of incorporation (if applicable)
- Franchise agreement (if applicable)
- A business plan outlining how the funds will be used
- Most recent balance sheet, income statement and cash flow statement
- Projected balance sheet, income statement and cash flow statement
- Schedule of business debts
Note: Each lender has its own documentation requirements. Be sure to inquire before applying so you’ll know what to expect.
Types of 100K Business Loans
There are several types of $100k business loans to choose from. Below is an overview of each option to help you decide which is best for your company:
Backed by the U.S. Small Business Administration, SBA loans help make funding opportunities more accessible to small business owners. There are three options: SBA 7(a) loans, SBA 504 loans, and SBA Microloans. All come with attractive terms and competitive rates. That said, funding times are often much slower compared to traditional business loans.
Term loans are the most popular form of business financing. If approved, you’ll receive the loan proceeds in a lump sum. Most are repaid over 3 to 5 years (or longer) in equal monthly installments since the interest rate is fixed. You can also get an unsecured or secured term loan – the latter requires some form of collateral.
Line of Credit
A line of credit operates like a business credit card. You’ll get access to a pool of cash you can pull from as needed during what’s referred to as a draw period. As you make payments and the balance increases, you can reuse the funds. Also, know that some lenders allow you to make interest-only payments during the draw period to make lines of credit more manageable.
As the name suggests, equipment loans are used to procure business equipment. The equipment serves as collateral, and most loans are payable in fixed monthly installments over an extended period. You could also qualify for a more competitive rate than you’d get with other forms of business financing since the loans are secured and pose less risk to the lender.
Merchant Cash Advance
This form of financing is ideal for business owners with limited funding options. Instead of using your credit score to determine if you qualify for funding, merchant cash advance companies approve or deny you based on your credit card sales volume. In addition, you’ll pay a factor rate instead of interest, and these costs are often exorbitant.
Asset-based loans are another form of secured business funding. They require you to put up business assets to act as collateral. And in the unlikely event you default on the loan agreement, the lender will seize the assets to recoup what’s owed.
Franchise loans are used to acquire a franchise. You can also use the loan proceeds to expand an existing franchise you currently own.
Finding the Best Lender for a 100K Business Loan
It can be tempting to go with the first lender offering the loan amount you need. But taking that approach means you risk missing out on more attractive loan offers.
So, it’s best to get loan quotes from at least three lenders before deciding which to do business with. When comparing lenders, consider the following:
- Accessibility: Do you meet the lender’s eligibility guidelines? Are loans restricted to companies operating in specific industries?
- Application process: Can you apply online, or are you required to visit a physical location? How long does it take to complete the application?
- Funding times: What’s the average funding time? Does the lender issue approvals relatively quickly, or does it take several days or weeks to hear back?
- Loan terms: Are extended repayment periods available? If not, can your company comfortably afford the higher monthly payments that come with short-term loans?
- Interest rates: is the interest rate reasonable? How does it stack up to $100k business loans from other lenders with comparable repayment periods?
- Lending fees: Does the lender charge loan origination fees? Will you incur a prepayment penalty if you decide to pay the balance early?
- Reputation: How is the lender perceived by past and current borrowers? Are they accredited by the Better Business Bureau (BBB) and licensed to do business in your state?