What is a Commercial loan?
It refers to arranging finance for running your venture successfully or to start a new one. You are required to prepare a projection of the business to show it to the money lender. A lender can ask some common question.
How much money do you want?
What is the purpose of borrowing money?
When will you pay back the loan?
What will you use as collateral for the loan?
How can you choose to pay back?
If a lender is satisfied by your answers, they may agree to grant you a loan. There are various types of Commercial loan. Some discussions are given below.
Types of Commercial loan:
There are two categories of commercial loans: secured or unsecured. You can borrow the one for which you are capable. The secured finance is provided on mortgaging some asset or property that act as a security. Your failure to meet your obligation may lead to losing of property or asset given to the lender. To get an unsecured loan, you need a strong credit history. When you are provided with the amount lesser than the secured loans, it may be called as a small Commercial loan. If you take a secured loan, you can enjoy a fair amount and term. Commercial loans in the USA are:
Bank loan: You need a business operating account, financial balance sheet and a Plan for starting or expanding the venture to get a commercial loan from the bank. You can apply for a secured loan or unsecured loan. You have to submit your credit history for borrowing unsecured commercial loan and a collateral to get secured Commercial loan.
Mezzanine finance: Such kind of financing is also known as equity financing. If you take this loan, you have to share your equity interest to the lender company. If you fail to repay the loan in due time, the bank will take the ownership of your business also. You can get this finance very quickly. You are not required to pledge any property as collateral.
Asset-based finance: A Commercial loan that is secured by collateral (asset) is called asset based finance. It’s also known as “commercial finance”. If you take this loan, you have to repay; otherwise, the lender will repossess the property that is used as collateral to recover their lending costs.
Invoice finance: There are two types of invoice finance; factoring and invoice discounting. It’s a loan system where the third party agrees to sell their unpaid invoices for a fee. A lender can be independent or part of a bank or a financial company. You can negotiate with lenders for getting better terms for yourself.