What exactly is a commercial loan?
A commercial loan is a debt-based funding arrangement between a business and a financial institution, like a bank.
Usually, this loan is used to fund operating costs and capital expenditures.
Commercial loans can require collateral, like property or equipment, and while these loans are short-term, they can be renewed or “rolled” to extend the time.
Your company would need to provide some financial statements to show your ability to repay the loan.
Expensive upfront costs and regulatory hurdles can prevent your small business from having the direct access to bond and equity markets for financing.
Because of this, a small business like yours must rely on other lending products that EquiLease One can provide for your business.
Okay, what else should I know about commercial loans?
These loans are usually granted to a variety of business entities to assist in short-term funding needs for the operational costs or the purchasing of equipment that facilitates that operating process.
Sometimes, these loans can be extended in order to meet the basic operational needs of your business, like payroll or the ability to purchase supplies that are used in the production and manufacturing process.
Besides using collateral like property, plant or equipment that the bank can confiscate in the event of default, you have the ability to use your accounts receivable as collateral.
You can also qualify for a Cash Flow Based loan based on your Business Bank Statement deposits. This type of loan can be gotten quickly. In as little as 24 hours, or sooner.
Your credit does play a large role when a financial institution considers giving you a commercial loan.
When applying for this loan, there are documents that are usually needed to be presented – usually balance sheets and other documents that are similar – that can prove that your company has a consistent cash flow. This helps assure that you can and will repay the loan according to its terms.
Once approved, you can expect to pay a rate of interest that falls in line with the lending rate that was prime when the loan was issued.
Banks can require a monthly financial statement through the duration of the loan and can require you to take out insurance on larger items that are purchased with the funds received from the loan.
Types of Commercial Loans
Commercials loans are usually thought of as a short-term source of funds for your business, however there are some financial institutions that do offer a renewable loan that can be extended indefinitely.
This type of loan provides your business that funds for ongoing operations and giving you a chance to repay that first loan within the specified time-period.
The loan can then be rolled into an additional or “renewed” loan period.
Businesses typically seek a renewable commercial loan when they need resources to help handle a large seasonal order from some customers while also still being able to provide what’s needed to other clients.
One form of commercial loans is a mortgage that is issued to commercial real estate.
Let’s Get Started. Contact Us
