Big Business Loan Tips for Large Businesses

Starting and running a business is no walk in the park. But if you’ve been in business for a while and you’ve got some years behind you, you may be looking for new ways to take your business to the next level.

When you’re no longer considered a “small business,” you’ll need to grow your strategies, perspectives, and approaches to business as the size of your business increases. Let’s explore a few tips when considering large business loans to help you succeed in the next stage of your business.

Know What You Need the Funding For

You don’t want to dive right into getting large business loans without knowing the depths of what the funding is for and how you plan on repaying it. Knowing the intricacies of how you’re going to receive, use, and repay the loan makes a big difference in how the process will go for your business.

Ask yourself what exactly you need the funding for, how much you need, and how long you want to be making payments for. Depending on your business and the financier you work with, you can decide how much your payments are based on the number of months you want to be spending repaying large business loans.

You want to make sure that what you’re getting a large business loan for a mission critical part of your business.

For example, you want to utilize large business loans on financing equipment, real estate, large seasonal sales variances, and more. You don’t want to use large business loans to finance losses that are ongoing, for non-essential assets in your business, build outs of your office, and so on.

Will the funding be used towards helping your business grow financially or is it just being used to cover losses and other non-essential roles?

Start Building Relationships with Financiers and Equipment Leasing Companies

Before you even apply for a business loan, you want to spend some time getting to know the different equipment finance companies that you have access to. This includes both financiers that are within your local community as well as online.

Establishing a relationship before you seek out the funds helps you to get a better idea of what your future financial partner is going to be like. Do you want to be getting large business loans from someone you’re meeting for the first time or someone you have a feel for and can actually trust?

This goes both ways. Just as you’re looking for people you can trust, lenders want to be able to see that the people they’re partnering with are also trustable.

By reaching out and getting to know them, you’re giving them a chance to get to know you. When it comes time to apply for large business loans, you’ll both have an established relationship between two trustable parties.

Review the Numbers

Although you’ve already spent some time going through the needs you have of getting large business loans, now is the time to go back and double check your numbers. It can be worth talking to a financial expert to verify that you’re asking for enough and not asking for too much.

Improperly estimating how much you need for your business can be a negative sign to a potential lender and you want to give each lender a sense of confidence in working with you.

Know Your Business Statistics and business financial statements

On top of knowing what you need large business loans for in your business, how much you need, how you plan on repaying it, and so on, you also need to know the financial statistics within your large business and an explanation as to whether this loan is to generate more revenue , or if it's to upgrade older equipment.

The big stats to find out within your business is the credit score, debt to income, time in business, report on industry risk, and report on cash flow.

● Credit Score - naturally you want to have as high of a credit score as possible as some lenders will only work within certain credit score parameters. Credit scores don't tell the whole story, there are many business lenders that will work with challenged credit scores.

● Debt to Income Ratio- it’s not uncommon for large businesses to have some debt and some lenders may not work with a business that exceeds a certain percentage of debt to income. 

● Debt Coverage Ratio- The debt coverage ratio usually needs to be greater than 1.20 margin. In order to calculate this ratio. Your numerator is going to be the companies Net income + depreciation + interest income + amortization. Your denominator is going to be Monthly payments multiplied by however many months into the year. The debt coverage ratio usually needs to be greater than 1.20 of net margin.

● Time in Business - as a large and established business, you likely won’t have to worry about the “2 year limit” that many    lenders look at when reviewing potential applicants for large business loans.

● Report on Industry Risk - as a large business, you’ll need to know the “industry risk” of your business, which is rated based on certain “SIC codes” from the government.

● Net operating income - knowing your cash flow can help you and your lending partner evaluate the likelihood of you surviving   during slow months (and for them, getting repaid). If the businesses net operating income is low or negative, you'll need to show the lender how the business has been surviving and will survive with your new debt.

Decide on the Best Type of Loan for Large Businesses

When it comes to getting large business loans, you have a few options that are common for most businesses, each varying in how they function and their affordability.  

A Working Capital Loan

This type of loan gives you a quick infusion of cash in which you pay back on a regular basis. This is often one of the fastest (usually within 24 hours) and most flexible forms of financing you can get.

Often times a business doesn’t need to secure the loan with collateral and it doesn’t have to be profitable during the application process. Other limitations (like bad credit) can be overlooked by some lenders.

Accounts Receivable Financing

This type of financing is a type of “asset-backed” financing, where a large business can get an “early payment” on invoices and purchase orders that are current outstanding. This gives the business more flexibility so that if the payments are delayed, they’ll still have the funding they need.

When the invoices and purchase orders finally come through, they are essentially repaying the lender directly based on the financial agreement you establish with your financing partner.

Business Line of Credit

Establishing a line of credit is like setting up a system to get large business loans in the future, before you need it. Similar to a working capital loan, a line of credit is repaid (e.g., monthly) until the borrowed amount has been repaid.

It can be useful to apply for a business line of credit before it’s needed, as the business will only pay interest on what’s actually borrowed. Businesses can view it as a “lifeline” just in case things go south and will need funding faster than getting a loan elsewhere.

Equipment Financing 

While equipment financing isn’t exactly a large business loan, it does offer you the ability to borrow and use equipment on credit. Particularly if your desired expansion has to do with acquiring more equipment, equipment financing is an excellent option. You will be given a rate and term for the financing, and at the end of it, the equipment is all yours. This is a great way to keep up with your competitors and quickly expand your business by utilizing a less common form of large business loans.

Big business loan companies are one source for big equipment financing loans. Private equipment financing companies can provide short and long term payment plans and even provide equipment financing for a business that needs to buy millions of dollars in equipment.

Equipment leasing companies excel in speed and creative structures for big business loans. Such as no payments for the first 90 days, quarterly payments, and seasonal payment plans. They can also fund a big equipment loan in a matter of days. Some equipment financing companies specialize in refurbishing and reselling large equipment. Since they're able to make a high return on reselling the equipment when your equipment lease is done. They're able to offer you a low equipment leasing rate that can beat your local banks rate. 

We recommend talking with a financial expert at Trust Capital to go over the details of the types of loans available to your business and its unique situation. Getting large business loans is not always the easiest thing to do, depending on your business, industry, and current situation. We can help you understand the ins and outs of large business loans, particularly if you’re looking for equipment leasing, equipment financing, or other similar financial options that can benefit your business.