How do you go about getting a huge business loan?

erifdekciw

erifdekciw

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May 3, 2008
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I don't know anyone personally who's ever gotten a huge loan besides a mortgage for a house. So I am wondering how do people go about getting huge loan amounts for things like opening up a business. (like 500k+ loans).

You hear about people who basically risk it all on a business when they literally have nothing to their name. I am not sure if you have to have exceptional credit to even be considered or how it works?

I have a business plan that i've been thinking about for awhile now. I don't have the best credit in the world, mostly because I am still pretty young and i don't own 20 credit cards right now so basically I don't have a strong credit history.

What are the chances of me going into a bank, showing them a strong presentation of my business plan and getting a loan in the amount of 300-500k+?

If my idea is good and solid and the bank sees that the business could succeed would I have to have perfect credit before they even give me a chance to hear me out?
 


I do know that personal credit and business credit are two separate things entirely, but Im not an expert on credit at all so dont take it from me. I believe though, that you start small and the creditors will lend you more credit over time
 
Your chances are zero.

Most banks that lend to small businesses do so with SBA backed loans. SBA loans have to meet certain underwriting criteria and need a personal guarantee from the loan backed by your home and credit.

What you need is an angel investor.

Business credit is dealt with on existing and past revenues + underlying assets of that business.
 
You'd need to have a solid business plan (the ones that are 20-30+ pages) showing your strategy, how you are going to monetize, the ROI, etc. to have any hope of getting that kind of loan.

I know of people just asking for a $30k loan that get shot down even with a detailed business plan. This was before the banks cracked down on loans. I think the minimum score is a 690 to even be considered for a home loan.

As Soupyone said, you'd be better off looking for a private investor. There are VC websites out there that you might look into.
 
The problem with this is you're trying to sell debt in a business that does not have existing revenues.

If your idea is good and you're asking for money people are going to risk their capital for equity. NOT DEBT.

You can't issue bonds on zero revenue.
 
Second on the Angel investors. You can issue debt that can be converted to equity at their option.

Banks will only loan you cash if you have strong historical financials, good cash flow, EBITDA etc. and a reason you need the cash (to expand, etc.)

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Q:
How do you make a small fortune in the software business?
A:
Start with a large fortune.
 
hectic said:
Second on the Angel investors. You can issue debt that can be converted to equity at their option.

Banks will only loan you cash if you have strong historical financials, good cash flow, EBITDA etc. and a reason you need the cash (to expand, etc.)

------
Q:
How do you make a small fortune in the software business?
A:
Start with a large fortune.
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A convertible bond is another idea, but then you're probably dealing with private lenders opposed to angels. That wouldn't be more than a deal sweetener then.
 
Fess up to the business plan yo! Between everybody here we can probably figure out a way to knock 200-300K off your capitalization needs unless you need the money to buy land.
 
Damn I was hoping banks would be a little more open to the possibilities but I understand why they wouldn't want to, especially right now.

And the only thing I wouldn't like about angel investor is no doubt they would want a % of the company. The last thing I want is having someone own like 30% of my company right off the bat and next thing you know they want to know every last detail and want to have input and make some decisions as well.

But thats really the only way I could get that kind of money so i think ill stick to grinding.
 
erifdekciw said:
Damn I was hoping banks would be a little more open to the possibilities but I understand why they wouldn't want to, especially right now.

And the only thing I wouldn't like about angel investor is no doubt they would want a % of the company. The last thing I want is having someone own like 30% of my company right off the bat and next thing you know they want to know every last detail and want to have input and make some decisions as well.

But thats really the only way I could get that kind of money so i think ill stick to grinding.
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30% of zero dollars in revenue is zero dollars.
 
erifdekciw said:
And the only thing I wouldn't like about angel investor is no doubt they would want a % of the company. The last thing I want is having someone own like 30% of my company right off the bat and next thing you know they want to know every last detail and want to have input and make some decisions as well.
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Dude.. WTF?! You actually think you can just get a loan for 500K from a bank because of a business plan? Then in the next post say you don't like angel investors because you don't want to give away 30%? Hah. You'd be incredibly lucky to get anyone to invest half a mill in your idea and only want 30% back.

You need a wakeup call here... lol. This ain't the Reagan Era anymo'.
 
If you want VC, or angel, or traditional loans you are going to have to have something else to back up your plan.

Income.

Accounts Due.

Clients.

Customers.

Something :)

A start up isn't just paper anymore. It's a functioning business that's proven it's income potential and is seeking capital to grow.
 
Watch a couple episodes of Shark Tank to get an idea of what good investors are looking for as far as company evaluation goes. Basically what you are saying is your business is worth about $1.7 million if you are looking for 500k at 30%. They turned down ideas left and right because people were asking for way too much money and didn't have enough revenue to back it up. These are existing businesses with revenue and not just an idea. Ideas are a dime a dozen. You will need some damn good results if you are looking for that much money.
 
In this current banking climate if you want to borrow 500k from a bank, you need to deposit 500k with them and the'll lend against it. It's tough out there right now...
 
erifdekciw said:
I have a business plan that i've been thinking about for awhile now. I don't have the best credit in the world, mostly because I am still pretty young and i don't own 20 credit cards right now so basically I don't have a strong credit history.

What are the chances of me going into a bank, showing them a strong presentation of my business plan and getting a loan in the amount of 300-500k+?
Click to expand...

Bad credit, no credit history and young?

I'd be surprised if you got $5k
 
Even with an investor you'd be lucky to walk away owning 40 - 50% of your company looking for that much capital. If you don't have much successful experience with the type of business you are looking to start your chances of getting an investor are very slim to none. A lot will also depend on what the capital is going towards and if what you are spending money on will retain equity that can be liquidated in the event the company fails.
 
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