$2 Million Business Loan: What Are the Benefits?
Chances are, you aren’t seeking $2 million worth of working capital; You likely have an opportunity on your hands that you’re looking to take advantage of, although there’s nothing wrong with securing this amount of working capital if you need it.
Regardless of the purpose of your loan, the funds give you the resources you need to afford a higher caliber of growth – without jeopardizing cash flow. Here are a few of the many benefits you can expect:
- Streamlined cash flow
- Increased purchasing power
- Capacity to take advantage of opportunities immediately
- Potential tax benefits (on some financing products)
- Numerous financing options to choose from
- Ability to tailor your contract to your business and opportunity
If you need $2 million, you don’t have to secure a singular loan for that amount; You can combine different financing options, like a term loan and line of credit, to provide the utmost flexibility as you push your business forward.
Who Can Use a $2 Million Business Loan?
Your eligibility for a $2 million business loan depends on the financial background of your business. You’ll need to have been in business for 1+ year and generate $2+ million in sales to reach an approval, unless you have collateral.
Here are a few examples of how different industries can use a $2 million loan to grow and scale:
- Construction – Purchase innovative technology to help plan and complete projects faster, like augmented reality or drone equipment
- Manufacturing – Work with your suppliers to negotiate bulk inventory discounts and lower your COGS
- Restaurants – Expand to a new location, take over a competitor, or invest in marketing to strengthen your brand
- Medical – Renovate a practice or invest in new equipment to upgrade your level of care
- Business Services – Invest in your computing equipment to speed up your processes or diversify into new markets
These are a few of the many industries that can benefit from $2 million in capital. Regardless of the market you operate in, a $2 million investment in your business can go a long way – if you invest in the right areas.
5 Types of $2 Million Business Loans
| Type of Financing | Description |
| Business Term Loan | Business term loans feature a single lump sum of capital with installment payments over a set time frame. Most term loans are between 7 to 25 years for a $2 million funding amount. One of the benefits of term loans is fixed interest rates with predictable monthly payments. Term loans are best for one-off expenses or in scenarios where you know exactly how much money you’ll need – such as real estate purchases, equipment financing, debt refinancing, and more. |
| Business Line of Credit | A business line of credit offers access to a pool of funds you can withdraw from as you need – up until your approved credit limit. The best part is that you won’t have to pay interest on the funds you don’t withdraw. In this way, lines of credit are a more flexible form of financing and ideal for businesses that don’t know the exact funding amount they’ll need. Another reason why business lines of credit are so flexible is that you’re oftentimes free to use your approved funds however you see fit. You can use a business line of credit to finance operational expenses, ongoing purchases, unexpected costs, or new growth ventures. Business lines of credit typically feature fixed interest rates and have a flexible payment schedule. Depending on your lender, you may be able to choose between fixed installments or monthly minimum payments. |
| SBA 7(a) Loan | Small Business Administration (SBA) loans are oftentimes the first choice for business owners. These loans feature funding amounts up to $5 million with long terms and some of the lowest interest rates on the market. SBA loans are partially government-backed. In other words, the government agrees to cover a portion of the loan amount in case you default. Lenders face less risk and offer lower interest rates as a result. Despite their many benefits, SBA loans feature rigid eligibility requirements that can make them difficult to obtain. |
| Invoice Financing | Invoice financing lets business owners exchange their outstanding invoices for cash. Invoice financing has some of the highest approval rates of any type of business loan. Your credit score, business history, and other factors tend to weigh less. The approval process is also typically fast, and it’s not uncommon to receive your funds quickly as well. On the downside, invoice financing features more fees than other types of business loans. It’s also rare to receive the full value of your unpaid invoices. |
| Revenue-Based Financing | Revenue-based financing exchanges a percent of your future sales for short-term funding. Qualifications focus on your business’s profitability rather than its credit history, which allows more entrepreneurs to reach an approval. Unlike most other financing products, revenue-based financing comes with a “factor rate” instead of an interest rate. Although it can be confusing at first, that percentage is multiplied by your funding amount to determine how much you’ll pay for your financing. |
How Much Will a $2 Million Business Loan Cost?
How much you’ll pay for a $2 million business loan depends on your credit score, the type of lender, the length of the loan term, the type of loan, and more. On average, $2 million business loans are on the higher end of what most lenders offer.
Most loan terms are between 7 to 25 years, with rates from 7% to 15% APR. SBA 7(a) loans generally feature the lowest interest rates, at about 6%.
To qualify for the best rates, you’ll need to show solid credit scores and strong revenue. Applicants with less impressive credentials may also qualify for funding but may have to contend with paying more.
Banks and credit unions tend to offer the lowest rates on business loans. Unfortunately, it’s also more difficult to obtain financing with these types of lenders. Different loan products, such as term loans or SBA loans, are generally less expensive than lines of credit.
Loans with shorter repayment periods feature higher monthly payments but tend to charge less in interest over the entire duration of the loan. Long-term loans have lower monthly payments. However, they’re also more expensive over time.
There are a variety of $1 million business loans to choose from, with each lending product featuring different interest rates, repayment schedules, and more. Some loan types may be better suited for specific situations.
Where to Get a $2 Million Business Loan?
You can get $2 million business loans from banks, credit unions, and non-bank lenders. The former option has restrictive eligibility requirements and lower rates, while the latter has easier qualifications and higher rates. The “best” option depends on your business.
Banks and credit unions are notorious for upholding inflated qualifications. At most institutions, you’ll need to have been in business for at least two years, generate $250,000 in annual revenue, and have a 720+ FICO score to reach an approval. Many businesses can’t fit their criteria, so they turn to non-bank lenders for a faster and more accessible process.
Non-bank lenders work with businesses of all ages, credit profiles, and revenue levels. While banks take an average of 60-90 days from application to funding, non-bank lenders can move through the process in hours or days. Although their rates are higher, the cost of capital becomes negligible if the business opportunity projects to yield revenue gains that offset the amount paid in interest.
Remember – There’s no “best” type of lender for business loans. Each option has specific benefits and drawbacks that may make one more attractive to a business than another, so it’s important to weigh out the pros and cons beforehand.
$2 Million Loan Qualifications – Explained
Online lenders, or fintech lenders, tend to be more lenient. If you’re applying at banks or credit unions, you can count on having to provide the following.
- Business credit score (700+)
- Personal credit score (700+ & at least 3 years)
- Bank statements (going back at least one year)
- Business plan (including information on your industry, competitors, growth strategy, etc.)
- Business history (at least 3 years)
- Cash flow
- Collateral
- Entity type
- Profit margins
- Revenue levels
Banks and credit unions maintain strict requirements as a way to minimize risk. They need to know your business is financially capable of managing payments on time and that you’re well-positioned for growth.
Lenders are always looking for ways to protect themselves in the event of a crisis – leading many to insist on collateral in exchange for financing. Collateral is any type of asset you own that holds value. In order to secure a loan, you may have to agree to give up your collateral in case you’re unable to make payments.
As you can imagine, offering up collateral adds an extra layer of risk for you as the borrower. On the other hand, collateral provides lenders with additional protection – which is why many may require it.
If you’re looking for more flexible financing solutions, you’ll want to consider online lenders or fintech lenders. Online lenders offer a larger selection of financing products for various types of business criteria. In many cases, it’s possible to obtain loans even if you have a lower credit score or shorter business history.
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 histories. Learn more here.
Compare $2 Million Loans
Most $2 million business loans aren’t easy to come by. You’ll need to have good credit and enough revenue to convince lenders you’ll be able to manage payments. It’s also not uncommon to have to put up collateral.
It helps to work with a team of dedicated professionals to guide you through the process. When in doubt, turn to National Business Capital: a Specialty Finance Group connecting businesses with financing opportunities. Our team leverages our exclusive lender relationships to get offers that other lenders can’t, all while keeping your business’s best interest at the forefront throughout negotiations.
Our Business Finance Advisors will help you explore various types of loan products – offering expert advice every step of the way. Our lenders emphasize your growth potential – rather than lock you into tight qualifications. Our funding solutions are also flexible and work fast – in mere hours.
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