Commercial Business Loans
What you need to know about commercial loans for your small business.
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What is a commercial business loan?
A commercial loan is a type of business loan used by large and small companies to fund growth and other initiatives. With most commercial loans, you’ll receive an upfront lump sum of money that you pay back over time, usually at a fixed interest rate.
“Commercial loan” is a broad category that covers many different types of business financing. Some commercial loans are meant to be used for specific business needs like buying equipment, purchasing real estate or funding construction. You may also see the term used to reference SBA loans or commercial business lines of credit.
OnDeck can help with your commercial financing needs.
OnDeck Line of Credit
A revolving credit line you can draw from 24/7 to receive funds within seconds.*
- Credit limits from $6K - $100K
- Flexible repayment terms of 12, 18 or 24 months
- Great for smaller ongoing expenses
How do commercial loans help small businesses?
A commercial loan can help small business owners cover long-term costs or fund large projects. They can be used to cover cash flow gaps, buy inventory, secure or build space for a new location, purchase equipment and more. Commercial loans can give you the working capital you need to grow your business, take advantage of new opportunities and handle any emergencies that come your way.
What are commercial business loans used for?
When it comes to commercial lending, you’ll find a wide range of products designed to fit any business need. While some commercial loans can be used broadly, others are designed to help businesses achieve a specific goal.
Commercial real estate loans
Also known as a commercial property loan, this kind of loan can be used to purchase or refinance commercial property for your business. These loans can look very different from a residential mortgage. The typical down payment is about 25% but it could be lower if you get a loan through the U.S. Small Business Association. With a commercial real estate loan, the amortization period is often longer than the loan term. This means that you could be looking at a big balloon payment at the end of your term.
Equipment can be expensive. Depending on what line of business you’re in, you may be looking at a very hefty price tag. Commercial equipment loans provide you the funds to buy the equipment you need to keep your business running and pay it back over time. These loans often use your equipment as collateral, meaning if you default on the loan the lender can sell your equipment to recoup their lost funds.
Commercial construction loans help you cover the cost of building or renovating your business space. You can use these loans to buy land, purchase material and even pay workers. These kind of commercial loans can keep your cash flow manageable during a build because lenders often accept interest-only payments while construction is ongoing. Just be sure you’re ready to handle the higher payments once your project is complete.
Commercial auto loans
Commercial auto loans work similarly to personal auto loans. You receive money to purchase a vehicle in the name of your business and pay it back over time. The vehicle often functions as collateral for the loan. You can buy cars, trucks and vans — but for more industrial vehicles you’ll likely need a different loan, like a construction loan.
Learn more about commercial business loans.
There isn’t really a difference between commercial loans and small business loans. They both offer borrowers money to fund their businesses that they can repay over time. However, you may find that loans labeled as “commercial loans” are targeted at large businesses.
The size of your business can influence what type of funding and how much you need. A large business likely needs more cash than a small business to fund growth. For this reason, loans marketed as “commercial” often offer much larger loan amounts.
The commercial business loan requirements will vary from lender to lender. Traditional lenders typically have strict eligibility requirements, and the loan application process can also take a long time and may be confusing.
Getting a loan guaranteed by one of the Small Business Administration’s (SBA) loan programs can make it easier to get a business loan, but getting approved for an SBA loan is notoriously difficult.
Another option for small business owners is getting an online loan. Online lenders typically have less stringent requirements that can make it easier for business owners to qualify. These loans may come with higher interest rates, but they also have higher approval rates.
Most lenders will have a minimum required credit score in order for borrowers to qualify for a loan. They may ask for a business credit score, a personal credit score or both. These requirements can vary from lender to lender. This number is a representation of you and your business’s creditworthiness. Again, traditional lenders such as banks typically have more stringent requirements than online lenders like OnDeck.
When considering what type of loan makes sense for you, think about your business needs. What do you plan to accomplish with this funding?
Term loan. This is a short term loan that gives you a lump sum of cash up front that you repay overtime, typically at a fixed interest rate. These kinds of loans are great for covering big expenses.
Line of credit. A business line of credit functions more similarly to a business credit card, allowing you to draw funds as you need them. They can be helpful for covering cash flow gaps and funding long-term projects.
Alternative funding. If you have more specific business needs, like refinancing your real estate loan or buying equipment, some of the more tailored options may be a better fit.