Commercial Loans & Financing up to $450,000
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To make money, sometimes you have to spend money. For a business to thrive, you have to invest and spend money. Anyone who has run a business in the past will tell you how much financial effort is required for any company or industry to thrive; most operations within the business require serious cash flow!
However, not every business owner has a vast bank balance to take their business to the next level. This is where commercial loans and financing come in.
What Is a Commercial Loan?
Commercial loans are a lifesaver to most businesses. Everything works under a system designed for commercial firms looking for funding options.
It is not feasible for some enterprises to access bond markets or equity to finance their operations. This is due primarily to regulatory complications, the time taken to access the funds, and the costs. Many financial institutions make it easier by offering these commercial loans.
There are two main types of commercial loans; secured and unsecured loans. The main difference is that a secured loan requires you to provide collateral while an unsecured one doesn’t. This creates a difference in the amount you can borrow for each, the terms of monthly payments, and the interest rate.
There is no limit to what you can use commercial loans for. For example, you can acquire assets for your company, pay for supplies and raw materials, cover operational costs, and such. However, you must specify what you will do with the money before accessing the loan.
What Is Commercial Financing?
Commercial finance is jargon in the business world that most people hear but don’t understand. The term covers a wide range of finance products offered to businesses to offer both long and short-term business solutions.
Most businesses seek commercial financing after realizing that growth is imminent. The business hierarchy might conclude that the only obstacle towards their growth is funding. The business doesn’t have to miss out on a growth opportunity because it is yet to generate enough income for reinvestment.
Commercial Loan vs. Commercial Financing
Even though loans might be beneficial, they can also be a recipe for disaster, especially if you don’t meet the loan terms as agreed. Therefore, understanding which funding option is best for your business is crucial!
A commercial loan is received in property, cash, and other material items and has to be repaid within a specified amount of time. The loan repayment amount includes the original loan (or value of the property), interest, and other financial costs agreed on.
Commercial finance is a little bit different. It involves cash management with lending, planning, and borrowing activities. Other aspects of a business, such as planning and saving, can be included. Commercial finances are broader than commercial loans. It can even involve regulating operations, analyzing credits and savings, resources, and many others.
Commercial Funding Options
- SBA loans– SBA is an acronym for Small Business Administration. However, the loan isn’t funded by the Small Business Administration; they just guarantee and back. There are different types of SBA loans; SBA 7(a) loans, SBA 504 loans, and microloans.
- Commercial cash advances– also known as merchant cash advances, a commercial cash advance is a flexible funding option designed for businesses that accept card payments to their customers. The money borrowed will subsequently be paid back using a portion of customers’ card payments .
- Commercial real estate loans– a commercial real estate loan is a commercial property loan issued to assist a business in buying property for either investment or the business space.
- Commercial truck loans– the loan is used by the borrower to buy commercial trucks to be used for business operations.
- Commercial equity line of credit– this commercial credit allows a business only to borrow up to a specific limit.
- Bridge loans– these are short-term loans that help a business bridge the gap between buying property and selling the previous one. This mostly happens when a business wants to buy more property before selling the one they already own.
- Inventory financing– is a loan used to purchase products for a business upfront, regardless of when they will be up for sale. The inventory purchased using the loan serves as the collateral.
Picking the Best Commercial Loan for Your Business
With several funding options at your disposal, how do you ensure that you secure the best commercial loan for your business? Here are some essential tips to help you choose the right loan for your situation.
1. Self-Awareness
Before you even start shortlisting your financial options, you need first to evaluate your business. This will help you fully understand the financial; situation, giving you a reference point from where you can base your search.
A key factor to help you become more self-aware of your business is taking a quick credit check. Your business credit score will help you understand essential factors such as the debt-to-equity ratio, making it easier to know the range of amount you need.
2. Compare and Contrast the Interest Rates
Comparing competitive interest rates might be a daunting task, and you need to be smart about it. The bigger the loan, the more attention you should pay to the different interest rates.
For example, suppose a $50,000-dollar loan will be repaid over three years. In that case, the difference between two percentage rates might not be quite significant—however, the difference matters for a much bigger loan (like $1 million).
3. Review Each Repayment Term
This is the most important step when choosing a lender. How much time are they giving you to repay the loan? What about their loan repayment schedule? Is there any collateral required, and if so, what are the requirements and risks involved? Choosing a lender with a suitable loan term saves you a lot of money!
4. Consider the Additional Fees
Loan application and processing have additional costs. For example, some lenders might require you to pay an application fee while others do it for free. Remember, even though you are looking for more, you still have to protect the money you already have.
5. Take Your Time
Don’t rush into things just because you need the money and have already found a willing lender.
Take your time, evaluate all your options, and do additional research. Once you have everything you need, you can now make an informed decision on the most appropriate lender to borrow from.
Benefits of Using Commercial Loans
Here are some of the benefits of commercial loans.
You Can Borrow a Considerable Amount for Your Business Projects
Commercial loans are different from personal financing, allowing you to borrow up to $50,000. You can borrow millions in the form of commercial loans, allowing you to attend major business projects and grow your business.
You Have Full Control of the Money
You can spend money from commercial lenders however you please and according to your plan. You won’t have investors, entrepreneurs, or lenders interfering with your decisions.
Commercial Loans Are Easily Accessible
You don’t have to wait until your business generates enough profit to reinvest. Commercial loans are a quick way to fix your financial problems.
Your Business Will Enjoy a Tax Deduction
Interest paid on commercial loans is subject to tax deductions at the end of every fiscal year.
You Don’t Have to Pledge Collateral
There are a lot of financing options that can offer you commercial loans without requiring collateral. All they need to do is present a profitable business proposition.
Drawbacks of Using Commercial Loans
Here are some of the drawbacks of commercial loans.
The Eligibility Criteria Are Strict
Some financial institutions such as banks are cautious about lending to small businesses. Their eligibility criteria shut out many businesses, especially if they don’t have a financial and trading history.
You Might Not Receive the Total Amount You Applied For
Institutions such as banks might decide that you don’t need all that money and decide to lend you a proportion of it.
Some Application Processes Are Lengthy and Tedious
You have to fill in applications for different lenders to provide business plans, account history, financial forecasts, and much more.
Commercial Loans & Financing Frequently Asked Questions
The lender will require you to present all your business’s financial details. This includes any current or past loans, debts incurred over the years, all bank accounts linked to the company, tax ID numbers, addresses, and complete contact information. Documents needed include tax returns, profit and loss statements, capital improvement summaries, and rent rolls.
It depends on the type of loan you take. Additionally, some lenders do not include collateral in their terms.
Yes, you can. Some loan types, such as commercial mortgages, can be accessed even with bad credit on your file. As such, it would be best to confirm with your lender.
If you want to improve your chances of getting approved, it’s important to look for ways to boost your sales and monitor your personal and business credit scores. Additionally, you should have all past and current financial statements ready as well as monitor the prevailing economic conditions.
You have to keep in mind that lenders are in this game to make money. As such, you have to put something down for the lender to be convinced and justify the risk. However, other financial options such as equipment financing and invoice factoring can come in handy.
Getting a commercial loan isn’t that hard if you have met the requirements. However, the process to prove your eligibility might be long and tedious, but hey, eyes on the prize, isn’t it?
Funding Your Business Is Our Business
Commercial Loans & Financing in Summary
Financial institutions with commercial lending and financing services have aided many businesses on their feet. From commercial business loans to commercial construction loans, the track record proves that the pros overshadow the cons from commercial business loans to commercial construction loans.
Once you land the appropriate lender, the rest will be easier! There are quality commercial loan types for you to find a suitable one.
Don’t Allow a Lack of Funding
to Hold your Business Back
It’s Time To Move Your Business Forward!