The Biggest Benefits Of Commercial Lending

Your business needs a large amount of funding in a short period of time. Perhaps you’re familiar with consumer loans, but you know you need a different type of financing to fund your venture. Commercial lending may be your answer, offering you access to the capital to build or expand without a long-term loan payoff.


Commercial Loan Terms Are Shorter


Unlike consumer loans, commercial loans have much shorter terms – usually 3 to 36 months. These loans are typically secured with real estate or other higher value collateral, including equipment or factored accounts receivables. This allows you to purchase what you need without being stuck paying for that loan for more than a few years. Some commercial lenders offer loans from 5 to 10 years in length, but they may require larger amounts of collateral to secure.


Commercial Loans Offer Higher Amounts


Because commercial loans are backed by high value collateral, loan amounts are typically higher. The amount is based on a loan-to-value (LTV) ration, which is the amount you want to borrow compared to your asset’s value. For example, if you’re backing a $90,000 loan with a $150,000 property, divide the loan amount by the property value to get an LTV of 60%. These higher loan amounts are ideal to fund startups and expansions, as they easily cover the costs of equipment, inventory, and other kinds of expenses.


How to Find a Commercial Loan


If you’re funding a new business, be sure to have a well-written business plan which includes a comprehensive listing of startup costs, your market research and marketing plan, projected financial figures, and detailed information on your management team. Also, remember that if you’re starting a new venture, commercial lenders will consider your own personal credit. For an established company, the lender will examine the business’ credit. Make sure you have the last several years of your firm’s financial statements and tax returns, and be ready to submit any other documents the lender requests.


When you’re ready to apply for a loan, seek a company who has partnered with the Small Business Administration (SBA) to offer SBA loans. Keep in mind that credit marketplaces may help you more easily find funding, connecting you with a variety of SBA-approved lenders in their networks.


Commercial Loans Can Help Build Your Business


Commercial loans are an excellent way to quickly obtain business capital. The biggest benefits of commercial lending include shorter loan terms and higher amounts, which can quickly provide funds to build or expand without being stuck with long-term payoff. A company specializing in SBA loans or a credit marketplace of SBA lenders can connect you with the capital your business needs.

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