WHAT IS A COMMERCIAL LOAN?

A commercial loan is a debt funding arrangement between a company and a financial institution, usually used to fund capital expenditures or helps in the business operational costs that they are unable to afford.

WHAT ARE THE TYPES OF COMMERCIAL LOANS?

Below are the types of commercial loans;

Bridge Loans: This is a short-term loan for your business or commercial property. The loan can range from five months to two years. In terms of interest, bridge loans are higher than permanent loans.

Permanent Loans: These are first mortgage loans on any commercial property or company that has an amortisation of five years in times of term. A permanent loan usually amortises after twenty-five years. These loans are made by credit unions, conduits, insurance companies, or banks.

Conduit Loans: These are large permanent loans given to a standard type of a commercial business or property. Conduit loans enjoy low given interest rates.

WHAT ARE THE BENEFITS OF COMMERCIAL LOANS?

Commercial loans are one of the most common ways in funding business operations. Acquiring commercial loans can bring certain advantages when applying for a loan. Below are some of the benefits of commercial loans:

  • To obtain a commercial loan, there is no requirement to produce collaterals
  • Commercial loans are often long term, which is between two years to nine years, giving you enough time to pay it back.
  • In collecting commercial loans, you retain the ownership of your business.
  • Commercial loans are also used for large sums, allowing to cover the start-up costs.
  • Commercial loans also help to increase cash flow.

HOW TO ACQUIRE A COMMERCIAL LOAN?

Either small or big business owners frequently acquire commercial loans in starting a business or in expanding your existing business to make it more productive. Below are some ways to acquire a commercial loan:

In acquiring a commercial loan, commercial lenders will demand to see your business plan in improving the business after receiving the loan. The business plan should show the goals for your business, including financial plans, projected revenue, and expansion products.

Commercial loan lenders will demand to know the reasons why you are collecting the loan. If it is a new business or company, explain specific reasons such as equipment purchases and building maintenance. However, if it is an existing company or business, show a written plan of expansion or improvement for needing the loan.

In collecting commercial loans, the lenders insist on showing a guarantee which may include savings, fund related to the company or business, and property equity.

Commercial loan lenders will demand company financial records or business records, including balance statements, profit and loss statements, records of financial debts, credit histories, personal tax, and tax returns. This information can help to determine or evaluate whether your company or business will pay back the loans.

WHO OFFERS COMMERCIAL LOANS?

Unlike small business or company loans, most banks compete to offer loans to you. Although big banks get involved, the purpose of the commercial loan market is to increase the broad range and independent loaners that compete in flexibility, service, and speed.

WHEN DO YOU NEED COMMERCIAL LOANS?

Below are some reasons you need commercial loans for:

  • International expansions.
  • Management buyouts.
  • Pre-packs and turnarounds.

In conclusion, I do hope I have been able to explain commercial loans to you, and you understand the benefits and needs of commercial loans. Do not hesitate to share with your family and friends.

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