Not every business owner can dream of starting or maintaining a business with their pockets. That’s why they are always seen in search of required start-up cash or loans. This can give a great boost to start and manage their business. In this platform, we will be learning about types of commercial loans for which you can start or expand your business in terms of working capital.

A commercial loan is a financing process of offering funds for business or business activities, making purchases or investing. Commercial loan plays a crucial role in a business expansion process such as increasing the working capital, acquiring new machinery, building new infrastructure, fulfilling all the required working operation cost and etc.

Banks and private business lenders are specialized in assisting commercial financing for businesses. Now, one of the main important things you need to know here is each and every form of commercial financing institution works differently by providing different commercial loan rates, having different eligibility criteria and repayment terms.

Read Also –How To Get A Business Loans For Bad Credit To Start Company

Types of a commercial loan for existing and new businesses

Let’s begin with the Best commercial loan types for your business.

1. Traditional Term loans

If you would like to borrow a set amount of money from a lender or from any other financing institution for business expansion, which you will have to pay back with some set interest, but little bit confused which one suitable loan you should apply for. Then we would suggest you go with traditional term loans. Because of the bank provide long term loans that have 25 years of repayment periods.

You can also hunt for medium-term loans form online commercial financing companies. The medium-term loan works gratefully for companies which have some specific goals for promoting or advertising campaign or new product experiment.

Let’s look at the amount for a traditional term loan

The traditional term loan is most suitable for large business investments in terms of offering a large amount for the loan. In traditional term loans, you can get an amount ranging from $5000 to $5 million.

Traditional term loan rates

A traditional term loan is considered one of the most affordable loans among business owners whose annual rates start form ranging around 6.5% to 30%. If you borrow loans from online lenders, their interest rates will be fixed but the bank may charge variable rates as it changes based on the market.

Read Also –How To Value A Small Business If You Are Looking To Buy Or Sell One

Top commercial lenders who provide term loan

A. Funding Circle 

It is a small business lending platform which let investors lending money or fund to small and medium-sized businesses.

Funding Circle Offerings

Maximum loan amount – $25,000 To $500,000

Loan Term – 6 months – 5 years

Interest rate – 4.99% – 22.99%

Read Also –Startup Business Loan

Requirements to be fulfilled in order to get the funding circle loan

  • Business bank statement of 6 months
  • Documents for business tax returns
  • Report on personal tax returns

B. Lending Club

The Lending Club is an online lending platform for consumers and small business owners who are in search of funding or loan for business. It specializes in creating personal loans for business purposes with small loan amounts.

Lending Club Offering

Maximum Loan Amount – $5,000 to $500,000

Loan Term -6 months – 5 years

Interest rates – starting from 4.99%

Requirements to be fulfilled in order to get the lending club loan

  • As we have discussed in the funding circle you will need business bank statements of 3 months.
  • Recent reports of business and personal tax returns
  • Information regarding existing business debt
  • Driving license

C. Credit junction

Credit junction provide a line of credit to small business and established one. Here borrowers pay down interest through the loan period and then make a lump-sum payment for the amount they withdraw from a line of business credit. Lump-Sum payments refer to when we pay our debt in one single amount of money without breaking it into installments.

 Credit junction offerings

Maximum loan amount – $500,000 – $5,000,000

Loan Term – 6-24 months

Interest rate – 14% – 19%

Requirements to be fulfilled in order to get credit junction loan

  • Business bank statement of 6 months
  • Recent personal and business tax returns
  • Profit and loss statements will be required for the past year
  • Inventory perpetual
  • M&E plan – which shows the progress of the business in terms of achieving its goals and targets.
  • Current account receivable- Displays the payment which the company receives from its customers after selling goods and services.
  • Driving License

Read Also –10 Best Low-Cost Franchises If You Want To Start A Business For Cheap

2. Short-term Loan

Short term loan - types of commercial loan

The short-term loan was introduced for a short time tenure or we can say less than a year or one-time loans. The loan is ideal for those business owners who do not like or are able to obtain credit from a bank for a longer tenure. In this loan lenders are able to offer these loans very quickly or it can be the day you apply. It is the fastest commercial lending where online applications take less time to complete the process.

Apart from commercial lending, lenders like to offer loans or money to new business owners with a lower credit score. Availing easier access money or cash generally comes at some price. Short-term loan lenders intend to charge the highest interest rates.

In order to qualify for short term loans, you should have 500 minimum personal credit score but you are not able to promote a completely new company and your business must be 1 yr old with generating annual revenue $50,000.

Read Also –How To Start A Restaurant Business

Let’s look at the amount for a short-term loan

The short-term loans are best suited for small business investment. The loans can range from $2,500 to $250,00

Short-term loan rates

For offering instant access cash or loan the lenders charge high-interest rates. Less creditworthy borrowers are also required to pay high-interest rates to lenders including with some risks.

After adding up origination fees, documentation fees, processing fees, prepayment penalties, and other fees the term loan can range from 8.5% to 80% APR.

Read Also –Legal Requirements For Starting A Business

Commercial Loan Term – 3 to 18 months

Current commercial loan rates – Starts at 10%

Top commercial lenders who provide short-term loan

OnDeck – OnDeck is an online lender which provides short-term loan and line of credit to businesses with charging high-interest rates than banks. And offers up $500,000 in funding.

OnDeck offerings

Maximum Loan Amount – $5,000 to $500,000

Loan Term – 3 to 36 months

Interest rate – 9.99%-79% Annual Interest rate

Requirements to be fulfilled in order to get a short-term loan

  • Business Bank statements of 3 months
  • Voided Business Check – A voided check is a check with the word void written over it which shows that the check must not be accepted for making payments.
  • Business Tax Id Number
  • Your business should be of one year
  • Business Owner’s social security number
  • The personal credit score of 600 or above
  • Average bank account balance

Business Baker

The best business alternative for providing customized funding and advice to small and medium-sized businesses with funding up to $200,000.

Business Backer’s offerings

Maximum Loan Amount – $5,000 – $200,000

Loan Term– 4 to 18 months

Interest rate – 1.10 to 1.30-factor rates

Requirements to be fulfilled in order to get a short-term loan

  • Proof of ownership
  • Voided business check
  • Recent profit and loss statement
  • Business tax returns report for loans up to $55,000 or more.
  • Recently maintained balance sheets for loans up to $75,000 or above.
  • Certificate of good standing

Read Also –How To Start An Import & Export Business In 6 Crucial Steps

QuarterSpot

QuarterSpot best in providing fully amortizing short-term loans to a business, After qualifying the eligibility criteria here business owners can access up to amount $250,000 with no prepayment penalty for paying down the loan after the deadline of the scheduled time.

Offerings of QuarterSpot

Maximum Loan Amount – $5,000 – $250,000

Loan Term –  9 to 18 months

Interest rate – 1.11 – 1.38 factor rate

Requirements to be fulfilled in order to get a short-term loan

  • 3 months of business bank statement
  • Documents for business tax return
  • Copies of driver’s license

3. SBA – Small Business Administration

SBA - types of commercial loan

SBA – Small Business Administration is known as the United States government agency which offers financial support to micro and small businesses.  Small Business Administration does not provide direct commercial loans lending to business but guarantees the loan that other banks and financial firms provide.

The best thing about SBA  loan for lenders is that they will still get their money back even if the borrower defaults and guarantees the lenders who make businesses to avail SBA loan, to offer commercial lending even to those who do not meet the requirements for traditional term-loan.

The Small Business Administration is quite similar to traditional term-loan in terms of low-interest rate but a time-taking process. SBA takes as required time as it wants to fund.

Three types of lending schemes that SBA has.

  • 7(a) program – With 7(a) program you can avail capital up to $5million to beef up your working capital.
  • CDC/504 Loan Program – The CDC/504 loan program ideal for real states, large equipment, and purchasing a building with a low-interest rate and 25 years of terms. And best for fixed-major assets ranging from $200,000 to $13 million.
  • Microloan Program – The microloan program works perfectly for start-ups, newly established, and growing small businessess that are not able to fulfill commercial loan requirements. With a small amount up to$50,000.

SBA, the best partially commercial lender with a loan amount up to $5,000 to $13 million, loan term up to 5-25 years, loan rates which start at 5%.

Top Commercial lender who provide SBA – Small Business Administration

A. SmartBiz

SmartBiz which establish a connection between businesses and banks for the commercial lending process with an amount up to $5million. And the repayment period is 10-25yr. Getting a loan from traditional banks could be a long process, it may take weeks. Better to go with smart biz for fast commercial lending.

SmartBiz Offerings

Maximum Loan Amount – $30,000 – $350,000

Loan Terms – 10 years

Interest rates – 8% – 9%

Requirements to be fulfilled in order to get a short-term loan

  • Documents for personal and business tax returns
  • The requirement of the current balance sheet is a must
  • Business Profit and loss statements
  • A proper scheduled report of existing debts
  • Business license
  • Driving license
  • Voided Business check

4. Commercial Real Estate Loan

commercial real state loan - types of commercial loan

Before talking about commercial real estate loan, let’s first know what is a real estate.

Real estate refers to property, land, building, air rights above and under the land. A commercial real estate loan assists you in purchasing and upgrading of commercial properties such as office space, buildings, warehouses and facilities regarding manufacturing.

Commercial Real Estate Loan is quite similar to equipment financing where the property itself fulfill the requirement of collateral for commercial real estate loan. Lenders charge low-interest rates on commercial real estate loans because they have complete assurance of getting their money back.

You can avail of traditional commercial real estate loans by fulfilling the qualification of having a high credit score with at least 2 to 3 years in business.

Read Also –How To Value A Small Business If You Are Looking To Buy Or Sell One

The loan amount for commercial real estate amount

Borrowing money from real estate lenders entirely depends on one of two distinct ratios LTV – loan to value and ARV – after repair value.

Loan to value – LTV loan is quite considerable for renovating a property where banks lend 80%LTV  whereas ARV is the comparison of your loan amount to the post-renovation value of the property.

In commercial real estate loans, Loan amounts start to be offering from $200,000 to $20million+ with a loan term 20 to 25 years and loan rates from 5% to 30%.

5. Business Line Of Credit

business line of credit

A business line of credit lets businesses borrowing money, repaying it and borrowing again up to the credit limit which is more similar to credit cards. It is one of the best backup sources or commercial loans to cover unexpected expenditures. One of the main advantages of a business line of credit is its flexibility by withdrawing or repaying whenever you want with interest on what you used. It works exactly as your credit card processes.

If we talk about its qualification or eligibility you must have a credit point score over 700 because it is a bit harder than a traditional term loan.

Commercial Loan Amount – $5,000 to 1 million

Loan Term – 6 months to 5 years

Loan Rates – 7% to 40%

Top Commercial Lenders offers Business of Credit Line

  • OnDeck
  • Credit Junction
  • Kabbage

Conclusion

So, these are the 5 listed business commercial loans. You can opt any of these according to your business need or requirement for both starting and expanding purposes. The loans have different eligibility criteria which you must fulfill to avail commercial loans for your business.  We also have mentioned the best known online lenders so that you would be easily able to communicate with your loan provider without stepping out of your home.

Related post

Leave A Comment