September 6th 2023.
What is a Commercial Loan?
A commercial loan is a form of debt financing where a company receives funding to cover expenses, expansions, equipment, or more that it repays, plus interest. The most common form of commercial lending is the business term loan, but business lines of credit and various loans are also used for specific purposes, such as equipment financing. Some commercial loans may require collateral, while others don't.
What types of Commercial Loans are available?
There are a variety of commercial lending options, such as business term loans, business lines of credit, SBA loans, equipment financing, commercial real estate loans, and commercial hard money loans.
Business term loans provide a one-time disbursement of cash for various business purposes, such as working capital, one-time purchases, and more. The loan is repaid in fixed monthly payments, including interest and fees.
Business lines of credit provide an available credit limit that companies can draw funds from as needed and only pay interest on what they draw. The credit limit replenishes as it's repaid.
SBA loans are partially guaranteed by the US Small Business Administration and offer higher amounts at lower rates and longer terms.
Equipment financing provides funds for essential business equipment, such as medical equipment, heavy equipment in construction, restaurant equipment, vehicles, commercial trucks and fleets.
Commercial real estate loan is used for real estate purchases or to build or renovate property. The commercial property being financed usually serves as collateral for the loan.
Commercial hard money loans are secured using high-value tangible assets as collateral, usually real property.
Where do businesses get Commercial Loans?
Businesses can get commercial loans from traditional lenders, such as banks and credit unions. You'll typically need at least two years in business, excellent credit, and high annual revenue to qualify.
You can also apply for an SBA loan through an SBA-approved lender.
Alternative lenders, also known as online lenders or fintech lenders, provide convenient online applications with minimal documentation requirements. You could potentially receive same-day or next-day credit approval and 1-3 business days funding.
Nonprofit organizations provide business financing options for companies in economically disadvantaged areas.
What are the benefits & drawbacks of Commercial Loans?
Commercial lending provides the necessary funding to help sustain operations or fuel growth. There are a variety of commercial lenders and loan types available.
Most traditional lenders offer high borrowing amounts at low interest rates and longer terms. However, qualifying for a traditional commercial loan is more challenging, and it takes a long time to fund.
Some commercial loan options have exhaustive documentation requirements, and you must have excellent credit. Alternative commercial loans have fewer requirements and are funded much faster but have higher rates.
How to apply for a Commercial Loan:
You can apply for a commercial loan through our lender network. The first step is choosing the right product for your needs and goals. Afterwards, you can gather the required documents.
For a business term loan, you'll need a driver's license, a voided check from a business checking account, and bank statements from the past three months.
Once you have the necessary documents, you can submit your application and you may receive same-day or next-day credit approval and 1-3 business days funding.
What is a Commercial Loan?
A commercial loan refers to a form of debt financing that a company can use to cover expenses, fund expansions, purchase equipment, and more. The loan is repaid with interest over a pre-determined period of time. The most common form of commercial lending is a business term loan, but business lines of credit and other types of financing are also available.
Types of Commercial Loans
When it comes to commercial loans, there are a variety of options available to businesses. Business term loans, business lines of credit, SBA loans, equipment financing, commercial real estate loans, and commercial hard money loans are all widely used.
Business term loans are traditional financing structures where the business receives a lump sum of cash for various purposes. Businesses can use the funds for working capital, purchasing one-time items, and more. The loan is then repaid in fixed payments over a period of time.
Business lines of credit provide a convenient way to access capital as needed. Companies can draw funds from the credit line as needed and only pay interest on what they draw. The credit limit replenishes as it is repaid, similar to a credit card.
SBA loans are partially guaranteed by the US Small Business Administration and offer higher amounts at lower rates and longer terms than traditional loans.
Equipment financing is used to purchase essential business equipment such as medical equipment, heavy equipment in construction, restaurant equipment, vehicles, commercial trucks, and more.
Commercial real estate loan is a business loan specifically used for real estate purchases or to build or renovate property. The commercial property being financed usually serves as collateral for these loans.
Commercial hard money loan is secured using high-value tangible assets as collateral and lenders typically prefer real property as collateral.
Where do businesses get Commercial Loans?
Businesses have several options when it comes to commercial business loan lenders. Traditional lenders like banks and credit unions may offer business financing, but they typically require at least two years in business, excellent credit, and high annual revenue to qualify. The US Small Business Administration offers SBA loans, but businesses must apply to an SBA-approved lender. For more lenient requirements, alternative online lenders are also available and can provide same-day or next-day credit approval. Nonprofit organizations may also provide business financing for companies in economically disadvantaged areas.
What are the benefits & drawbacks of Commercial Loans?
Commercial lending provides the necessary funding to help sustain operations or fuel growth. However, traditional lenders have strict qualifications and some commercial loans require extensive documentation. Banks and credit unions may also take a long time to close and fund a loan. On the other hand, alternative lenders are more lenient about a low personal credit score or shorter time in business, but they typically have higher interest rates.
How to apply for a Commercial Loan
When applying for a commercial loan, the first step is to choose the right product for your needs and goals. Then, you will need to gather the necessary documents such as your driver's license, a voided check from a business checking account, and bank statements from the past three months. Finally, you can apply for an online commercial loan through our lender network.
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