All That You Want to Know About Commercial Loan

Commercial loan is a loan lent to a business or individual to cover the expenses of running the business or to buy new or upgrade business assets. These should be usually repaid in a short time, anywhere from 30 days to one year and can be unsecured or secured with collateral. The interest rate can be fixed or variable. You can apply for this loan to purchase some new land for your business, for some new equipment or you can apply for the same to arrange your capital investment. But when you apply for the commercial loans, you need to check the rate of interest and the hidden costs of these loans. Some lenders can offer you low interest loans, but they will charge you some hidden costs like processing fees, late fines, foreclosing charges and application fees. So, beware of these additional costs and always check those costs before you apply for the loan.

Commercial Loan

Criteria to be met by commercial loan applicants: 

• Creditworthiness – The applicant will have to prove the creditworthiness of the business by means of balance sheets, credit history, etc. to guarantee that the business is making steady profit. This will be a proof to the financial institute that its loan will be repaid on time with the expected rate of interest.
• Business plan- you need to produce your business plans and you can find a space on your loan application form that states the purpose of loans. In this section, you need to write your business plans and purpose of loans in details. 
• Monthly financial statements- you need to submit your monthly financial statements along with the bank details for the loan. Apart from that, if you have any business insurance then you need to submit the same with the premium details to the lender. 

Collateral commercial loans: 

This assures the lender that you have additional source of repaying the loan in case your business fails. Most commonly accepted collaterals include:

• Cash or savings secured loan. This is when the loan is released by a financial organization where you hold an account. In case of failure of payment, the account is liquidated.
• Inventory financing. In case of failure of repayment, goods on the inventory will be sold and loan covered.
• Accounts receivable financing refers to loans granted based on outstanding payments which will be collected by lender in case of failure of payment by borrower.

Commercial Loan

Advantages of Commercial Loan: 

• Since a large amount of money can be borrowed at one go, a large part of cost can be covered with just one loan.
• The interest rate is lower when compared to other loans and usually is long-term loan, the chances for default is low and hence can maintain good credit history.
• They can be obtained even without collaterals.
• Since long-term payments are often chosen, one can repay the loan slowly as profits increase.
• With its low interest rate and long-term payment options, it is ideal for start-ups. 

How to avail the best commercial loans?

There are many financial institutions offering commercial loans. Some tips to choose the most appropriate one:

• Ask for a few references from the different institutions to see if their customers are satisfied.
• Discuss the entire range of options for loan available.
• Make sure they understand your kind of business and have dealt with similar ones before.
• Once you have zeroed in the most suitable financial institution, choose the kind of loan which will best suit you.

So, make sure that you considered all the above-mentioned aspects before taking a commercial loan. This will help you to get the right option that is affordable and quick at the same time.