How to Get a commercial loan for Your Business

You have a business idea and you’re ready to dive in headfirst. Business loans are not just for homeowners. There are many different kinds of business loans—and they can help you get your fledgling business off the ground.

A commercial loan is a type of loan that businesses use to meet their capital expenditures needs, purchase fixed assets or fund long-term operating costs. Depending on the scope and size of your operations, there are several types of commercial loans available to small businesses.

We’ll discuss each type of commercial loan, and how much funding you can expect to receive from each option based on your company’s projected loan repayments. Let’s take a look at the different types of commercial loans so you can choose what works best for your business:

What is a commercial loan?

Commercial loans are often used to fund business operations or to purchase fixed assets such as equipment or real estate. They are also called business loans or commercial financing. Commercial loans are a type of lending designed specifically for businesses.

The terms and conditions of commercial loans vary widely across different types of commercial loans and lenders. Most commercial loans carry a fixed interest rate and a fixed repayment schedule with a maturity date upon which the full balance of the loan must be repaid in full.

Equipment Loan

An equipment loan is a type of commercial loans that provides funding for commercial real estate and/or equipment purchases. Equipment loans can be either term loans or revolving lines of credit (discussed below), and are designed to assist companies in purchasing equipment that they need to operate but cannot afford to pay for upfront.

Equipment loans are often used for commercial real estate, such as a building or warehouses. An equipment loan is a form of financing that lets you buy commercial real estate or capital equipment now and pay back the loan as the business grows. As the value of your assets grows and your business becomes more successful, your loan payments increase.

Commercial Mortgage

A commercial mortgage is a type of commercial loan for the purchase of the commercial real estate. The lender will finance a percentage of the total cost of the commercial real estate (typically 80%-90% of the total purchase price). The lender will then receive a fixed monthly payment for the remaining amount of the loan until the loan is paid off in full.

Commercial mortgage lenders will generally ask for a down payment of 10% or more on the purchase price of the real estate before providing the funds needed to purchase the commercial real estate. 

Revolving Credit Loan

A revolving credit loan is a type of commercial loan that is designed as a line of credit with a variable interest rate. This type of commercial loan is not typically used to purchase fixed assets. A revolving credit loan provides the borrower with a line of credit that can be drawn upon and repaid as needed.

The borrower can use the revolving credit loan to pay for operating costs such as payroll, utilities, and inventory. The revolving credit loan can be paid back in full and/or with interest at any time. A revolving credit loan can be set up as a term loan or a line of credit.