What is a commercial business loan? A commercial business loan is a form of funding for your business. It is generally used to fund working capital, growth or an acquisition. They are generally not used for real estate purchases.
A company would use a commercial business loan to help expand their company and follow their vision for what the company can become. The reason it is important is because it provides a boost of capital that can be used for things other than everyday operations.
When you are looking to take a big growth step, a commercial business loan can be the bridge to get there.
It provides the money for large business investments that a company cannot fund on their own.
The target group for commercial business loans are middle market companies. The reason for this is that commercial business loans are for companies that do not have the capital strength to fund both regular operations and also company growth at the same time.
Medium sized businesses rely on their profits to keep the business moving forward. If your company is smaller and looking to develop different products, or increase technology, or expand plants, or acquire a company, you must look toward outward financiers that will give you a boost of capital that you will be able to repay over a period of time.
The repayment terms for commercial business loans can be either short-term or long term. Commercial business loans are a good option compared to bringing in capital from an investor. They are far less expensive than selling shares and available from a variety of funding sources including banks, mezzanine lenders and business development corporations.
The qualifications and specifics of a commercial business loan structure vary based on the standards of the lender. Commercial business loans from a bank will be asset based. Commercial business loans from mezzanine lenders will be more cash flow based.
When applying for a commercial business loan, financial institutions scrutinize your company’s financials in order to tell if the loan fits their credit parameters. Financiers are looking to make sure that your company will remain profitable after the loan and will put the loan to good use.
It is important that your company shows good precedent when it comes to repayment of loans and also utilization of excess capital. If a company has just been formed and does not have past financials to back up its case for the loan, it will be difficult to attract a commercial business loan.
Commercial business loans are the way to go if you are looking to get capital fast and need a long term source of funding to keep your company growing.