Commercial loans are loans extended by a bank, finance company or other lender who focus on corporate finance. Commercial loans come in a variety of forms such as lines of credits, term loans and mezzanine loans. Whatever the form, they can all be used to finance your business needs.
The key to doing this is to understand the differences between the loans and how they are structured. Once you know this, you can select the loan the best syncs up with your corporate strategy. If you are interested in expanding the amount of money you have to run your day to day business, you are interested in working capital financing.
This is best handled through a revolving line of credit. If you are looking for money to purchase equipment or to expand the size of your business, you are best served by using a term loan. Term loans give you time to repay the loan, so as your increase your cash flow from the expansionary project, you will be able to repay the loan.
If you are looking for business acquisition financing, a mezzanine loan is the best option. A mezzanine loan is a loan structured beneath a bank loan. It allows you to dramatically increase the size of your business without having to repay the loan until the end of the loan term which is usually at the end of five years.
A mezzanine loan is similar to receiving equity investment in your business. Regardless of what you want to fund, a mezzanine loan is a good bet as it is a flexible form of capital.
Often companies look to create a customized funding solution which involves a combination of loans to fill a specific need. This is a great way to lower the interest cost, increase the amount of the financing available and to match the debt service with the cash flow output.
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