No one makes it big in entrepreneurship without getting some help along the way. For small business owners looking to expand or grow their company, taking out a business loan can give you access to the capital you need to level up. If you’re looking for financial assistance to improve your product, develop a new resource or service, or expand your business’s physical space, you may be asking yourself: “How much of a business loan can I get?”

In this article, we’ll be diving into that exact question, exploring all the factors you need to consider to determine exactly how much of a business loan you’re eligible for and how to go about applying and getting approved for one. Read on for all the information you need to get started.

How much of a business loan can I get?

Business loans are intended to help companies quickly gain access to large sums of money in order to get their company started, make a large-scale change (like buying property, equipment, or materials), or cover the cost of other expenses. But not all loans offer the same amount, the same terms, or are intended for the same groups. There are a number of factors at work when determining how much money you’re eligible to receive for a small business loan.

Depending on details like your business type, credit score, and overall need, the number could range anywhere from $500 to $5 million. 

What factors impact how much I can borrow?

While there are many things at play in this question, the below list includes some of the most significant factors that will determine how much of a loan you’re able to take out for your small business:

  • Loan type: There is no shortage of loan options available to you, which means you’ll need to evaluate each one closely to find the right fit. While you’re able to take out traditional bank loans, focusing your attention on small business loans will allow you to find the best fit for your circumstances. Great options include Small Business Administration loans, short-term loans, lines of credit, and microloans.
  • Credit score: When you apply for a loan, lenders scale the amount they’re able to offer you based on your credit score. Typically, they’ll consider both your personal and business credit and grant the highest loan amount to those with scores somewhere in the good to excellent ranges. If necessary, try to take steps to improve your credit scores before initiating the loan application process to ensure you get the highest possible loan amount.
  • Industry: The industry in which you work also factors into the amount of loan you’re eligible for. Since banks are invested in the security of their money, individuals working in fields considered “safe and steady” will get higher loans than those who work in industries deemed risky or unstable. In extreme instances, if your industry is considered too great a risk, your application may be rejected outright.
  • Years in business: The longer you’re able to prove your ability to run a business, the more likely a lender is to grant you a loan and the larger the loan is likely to be. This is because established business owners with a strong track record are considered less of an investment risk. Lenders evaluating your business history will be able to see that you know what you’re doing and can handle your finances, so they’re more likely to have confidence when lending you a sizable amount of money.
  • Debt-to-income ratio: Lenders also consider your debt-to-income ratio when evaluating how much to offer you in a small business loan. Since this ratio impacts your budget month to month, it could impact your ability to pay your loan debts. If the ratio is deemed too high, you may receive a small loan offer or be rejected altogether.

Every bank calculates loan offers differently, so the offer you receive from one may be significantly higher or lower than what you receive from another. Consider the exact needs of your business carefully and find a lender who best meets your criteria before committing—these decisions can have a long-lasting impact on your business.

How to apply for a small business loan

Now that you know what you’re looking for, you’re ready to apply for a small business loan! Let’s walk through the general process so you know what to expect:

  • Choose the loan type and lender you want to work with: Traditional lenders are a great option if your finances and credit score are in good shape, but you may want to look into something like merchant cash advances or alternative lenders if your financial health needs some work.
  • Prepare the necessary documents: No matter where you’re applying, you’ll want to have the same kind of information ready. This includes a business plan and tax ID, personal financial documents as well as those for your business (think bank statements, tax returns, and balance sheets), and information about other owners in your business (anyone who owns more than 20% of the company).
  • Submit the application: Every lender has their own specific application process you’ll need to follow. You should expect an in-person or telephone interview to be part of the process, in addition to completing a physical or online application to help determine your loan eligibility.

Contact your chosen lender directly to learn more about a their specific application process and requirements. This will ensure you’re well prepared for each step.

Is it time to take out a small business loan?

The decision to take out a small business loan could arise out of an exciting plan to expand or a difficult moment when you’re struggling to stay afloat. No matter what prompts your decision to take this step, it’s not something to be taken lightly. If you’re unsure whether it’s time to take out a small business loan, here are a few great reasons to consider taking the plunge:

  • You’re looking to invest in new equipment that will improve your current products and workflows or have the potential to open new doors for your business.
  • Your business has hit an unexpected rough patch and you’re struggling to cover the costs for inventory and operations that keep you running day to day.

While the decision to take out a loan may feel daunting initially, doing so has the potential to save or transform your company.

The size of business loan you can get depends on a lot of factors. Discuss your situation and needs with your financial advisor to determine the best next steps.