commercial business loans

Commercial Business Loans: How Can They Be Helpful?

Commercial business loans are defined as loans that are generally issued for business plans and purposes. Like all kinds of loans, it helps in the creation of debt that is to be repaid with added interest. There are different types of commercial loans like bank loans, asset-based financing, micro-loans, mezzanine financing, business cash advances and cash flow loans.

Types Of Commercial Business Loans:

Bank Loan

commercial business loans

Source : justbuild.co.in

The bank loan is obtained from any bank and can be either secured or unsecured. In the case of secured loans, banks require collateral damage. This collateral may get lost if the repayments are not made on time. The bank then would want to see the accounts of the business ‘ and the balance sheet and, lastly, the business plan. It will continue to study principals’ credit histories as well. Most of the smaller businesses are therefore turning towards any kind of  Alternative Finance Providers. The loans obtained from credit unions can be referred to as bank loans too.

Small Business Administration Loans

commercial business loans

Source : ozarkbank.com

The Small Business Administration or better known as the SBA does not create loans. Instead, it guarantees loans that are made by individual lenders. The important loan programs by the SBA are that which includes both the express and standard options are Micro loans, 504 Loans which helps in providing financing for fixed assets namely the real estate and disaster loans.

Mezzanine Finance Loan

commercial business loans

Source : summitcapitalfinancing.com

The main function of Mezzanine finance is to effectively secure the company’s debt on its equity and to allow the lender so that he can claim part-ownership of the business only if the loan is not repaid back on a fixed time fully. This helps businesses borrow from lenders without giving or keeping other collateral, but there are risks that dilute principals’ equity share if there is a case of default.

Asset-based Financial Loans

commercial business loans

Source : sponsorshipcollective.com

While this was considered the financial option of last resort, asset-based lending is quickly becoming a popular choice for small businesses and business firms that lack the credit rating or the needed track record to qualify for other different forms of lending. In simpler words,  this kind of finance involves borrowing by keeping one of the company’s assets with the lenders, and the lender will focus on the quality of the collateral rather than the prospects of the company and the ratings of the credit. Businesses in total can take against numerous types of assets that include premises, stock, plants or even receipts.

Micro-Loans

commercial business loans

Source : i1.wp.com

Micro-loans  generally mean a smaller amount of loans,  which are usually for loan amounts below a certain fixed amount. Most banks are not more likely to give these kinds of loans than alternative lenders. Even if they provide these loans, the decision is based on both the personal credit score and the business credit score.

Online Lenders

commercial business loans

Source : i1.wp.com

A significant rise has been noticed in the number of online lenders who offer small business loans. These online lenders belong to alternative lenders that originated billions in small-business loans in 2014. Lenders who are not from the bank make small-business loans have seen their profits being doubled and not to mention their outstanding portfolio balance. Some of these online loan givers provide loans from their capital. Other lenders may use the model known as ass marketplace models, by which they match borrowers to loan products from different lenders. Others simply go for crowdfunding platforms that help businesses raise their own capital from several sources.

Secured and Unsecured Business Loans

commercial business loans

Source : moneylend.net

It is to be remembered that business loans can either be secured or insecure. In the case of a secured loan, the borrower pledges an asset against the debt. When the debt is not paid back on time, the lender is able to claim a secured asset. Unsecured loans, on the other hand, do not have pledged assets, though the loan giver will have a general claim on the borrower’s assets if the loan is not paid back.