A $400,000 business loan comes in many forms, from lines of credit to term loans, and you’ll have several options to suit a range of credit scores.
Generally, you’ll need at least a couple of years in business and to make over six figures to qualify, though eligibility varies by lender. Weigh multiple lenders to make sure you find the best rates and terms.
Most lenders offer $400k business loans, including banks, credit unions, the Small Business Administration (SBA) and online lenders. Established businesses might find the best rates on a business loan of this size with a large national bank. Newer businesses may have better luck with alternative online lenders or SBA loan providers, since they have more relaxed eligibility requirements.
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Business loans that finance up to $400,000 for your business are as follows:
| Type of financing | Description | Use |
|---|---|---|
| Short-term business loan | An unsecured lump sum loan with repayment terms of up to 18 months | To cover unexpected costs or to survive a downturn |
| Business term loan | A standard bank type loan with fixed repayment terms | Businesses looking to expand or refinance existing debts |
| Business line of credit | A revolving line of credit for ongoing expenses | Short-term financing needs, managing cash flow or handling unexpected expenses |
| Merchant cash advance | A lump sum payment in exchange for a percentage of future credit card sales | Businesses with high and consistent credit card sales or those unable to obtain financing elsewhere |
| SBA loan | A low interest small business loan partially backed by the government | Various purposes, including working capital, purchasing real estate and refinancing existing debt |
| Equipment financing | Loans specifically for the purchase of equipment | To acquire equipment without large upfront payment |
| Inventory factoring/Inventory financing | A loan secured by businesses’ inventory | To free up cash tied to inventory |
| Commercial real estate loans | Loans for purchasing property for business use | Businesses looking to buy, refinance or develop commercial property |
Secured loans require collateral, making them easier to qualify for if you have a lower credit score. You’ll need some type of asset that can back the loan, which goes through an appraisal process. These types of loans may offer a shot at lower APRs and more favorable terms since the lender is minimizing risk with your collateral on the line.
Unsecured loans don’t require collateral but may require a personal guarantee and typically come with higher costs and APRs.
While a $400,000 business loan is below the average borrowing amount of $660,000, it may still be difficult to qualify for if you just started your business.
To qualify for a loan of this size, you typically need:
You can expect competitive rates for a $400,000 business loan if you have strong credit and business financials. However, how much you pay really comes down to what kind of loan you get. As an example, a traditional bank term loan may have rates that start at 8% APR, while the SBA caps its rates at the prime rate plus 2.25% to 2.75% for most programs. And for loans under $1 million, SBA fees are at 0%
Use the calculator below to find out how much your loan might cost based on different rates and terms.
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Most $400,000 loans are term loans with fixed or monthly repayments, while some short-term business loans may require more frequent repayments, such as biweekly, weekly or daily. It’s important to review the repayment terms before finalizing the loan agreement to ensure you can meet payments.
If you apply for a merchant cash advance, you’ll repay your loan with a percentage of your business’s daily sales. If you get an advance on your unpaid invoice with invoice factoring, you won’t repay the factoring company — you just won’t get your invoice’s total value.
The application process for a $400,000 loan varies by lender but generally involves the following steps:
Yes, you can opt for a $400,000 SBA loan. These loans offer low rates and higher amounts to business owners who have a tough time qualifying with other private lenders. But the process is competitive, and many applicants don’t walk away with an approved loan. Usually, the higher the loan amounts, the more annual revenue you need.
You may be able to get a $400,000 business loan with bad credit if you apply for a merchant cash advance or invoice financing — but you’ll need the revenue or unpaid invoices to support this loan amount. However, prepare to pay more in fees and interest if you get a bad credit business loan.
Yes, but it is not that common for startups or new businesses, since $400,000 is a large amount. Lenders such as banks, SBA lenders and online lenders may be open to working with startups seeking this amount but only if you meet strict requirements.
Not sure where to start? Visit our comprehensive guide to startup loans to explore your options.
To get a $400,000 business loan, you may need several years in business as well as a good credit profile, though not always required. To compare lenders and get prequalified, see our guide to the best business loans.
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