How Much Financing Can Your Business Get?

Look, running a business is an adrenaline-fueled ride. You’re the skipper, the decision-maker, the visionary. Great gig, right? But let’s talk raw facts – a venture needs liquidity to operate and grow, which means considering loans. Wait a second, Lawscape, from the illustrious Lawscape, I hear you ask, “What’s the average small business loan amount I can get?”. Let’s unpack this together.

Understanding Small Business Loans

This is quite straightforward. In layman’s terms, a small business loan is a ‘financial handshake’ between a business owner and a lender. An agreement is signed stipulating the loan amount, interest rate and repayment period.

SBA loans (loans guaranteed by the U.S. Small Business Administration) are significant players in this landscape. This agency collaborates with financial institutions (banks, credit unions, etc) offering loans – they don’t have the cash themselves, but hey, they’re pretty good wingmen. They cover up to 85% of a loan if the borrower defaults, significantly reducing the lenders’ risk.

What Determines Your Eligibility for an SBA Loan?

Your eligibility for an SBA loan isn’t just determined by a dartboard. Variables like the nature of your business, credit score, and business equity all come into play.

Delving Into the Average Small Business Loan Amount

In 2018, the average small business loan amount was $663,000. I see your raised eyebrows – but remember, that’s the average across all business loans.

The funds you could qualify for can range from $13,000 to well over $1.2 million, depending on your business’s needs and your lender’s offerings.

Different types of business loans also have different average amounts. Let’s dive into these more.

The SBA Loan Breakdown

SBA loans are worth considering if you’re planning for significant business investments. In 2017, the average business loan amount via SBA backed loans was approximately $107,000.

Short-Term Business Loans: A Snapshot

Short-term business loans, lent out by alternative, non-bank lenders, are generally easier to acquire than long or medium-term loans. They’re ideal for testing a business idea and come with a quicker repayment period. The average short-term business loan hovers around $20,000.

Medium-Term Business Loans: The Lowdown

Medium-term loans, also offered by alternative lenders, present larger sums of money that can be repaid over a more extended period, usually between 2-5 years. These loans have predetermined repayment schedules, and eligible business owners can borrow up to $500,000. On average, loan amounts for these loans sit around $110,000.

What about a Business Line of Credit?

A business line of credit is perfect if you need some spring in your step. These loans give you access to a certain amount of money, but you only pay interest on what you borrow – think of it as a financial slinky. Commonly offered by non-bank lenders, this option has a more low-key vibe than a regular loan. Average business line of credit amount? Around $22,000.

Exploring Equipment and Invoice Financing

Equipment financing lets a business borrow funds to cover up to 100% of equipment cost, repaid over a predetermined period. Invoice financing allows businesses to get loans up to 85% of their invoice cost. With this kind of financing, there isn’t a fixed average as it very much depends on the equipment or invoice value.

How Do Lending Companies Affect Average Loan Amounts?

The game changes depending on the lending institution.

Large banks cater to business owners who want to swim in deep waters – they can deliver substantial loans. However, their high watermark requires strong credit scores, solid finances, and a mature business that’s been around the block. Typically, large banks grant loans averaging about $564,000.

Smaller banks often lend smaller loan amounts compared to their elephantine counterparts, but the amounts are still relatively high for most small businesses. They tend to average around $185,000.

Consider Alternative Lending

If you’re a smaller enterprise that doesn’t require a colossal loan, alternative lenders might be your next friends. They offer a more diverse variety of loan types, lending amounts starting from smaller sums to over $1 million. The average loan amount from an alternative lender is around $80,000.

Conclusion: What’s Your Smart Business Loan Decision?

Your final loan amount will depend on the scope of your business plans. As a rule of thumb, most small business loans will hover around or below $100,000, tailored to your business’s aspirations and necessities.

If you default on your loan, both the lender and the SBA will expect you to pay the debt based on the personal guarantee you signed. But hey, let’s hope that doesn’t happen.

Got any business loan-induced headaches or want to pick my brain even more? Feel free to reach out to me. We, at the Lawscape, are always ready to guide you through your financial mazes.