Commercial Loan Defined

By Doherty • July 30th, 2011
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A commercial loan is a commonly used financial tool that allows business to secure the funding they need to strengthen their business. Smaller business typically have a more difficult time securing a loan of this type, and usually opt for a commercial mortgage instead. Commercial mortgages use the business itself as collateral for the loan, making the funding easier to secure.

One of the benefits of a commercial loan versus other types fo loans is that it can be used for many things. From start up costs to expansions to refinancing of existing debt, these loans can be used at the discretion of the borrower. It’s not uncommon for business owners to find themselves in a situation that puts them in a postion to apply for a commercial loan, as most will at some stage need additional funds for business development.

Banks and financial institutions are the common sources for commercial loans. As the market changes and demand increases, business owners find a much broader array of options in the realm of corporate finance. No longer limited to the traditional bank, funding is often secured from a larger venture capitalist or other institution. There’s no doubt that there are many options available to the business owner who seeks capital for their business.

The process for applying for a commercial loan is relatively simple, but it’s important to be aware of the documentation needed to secure the loan. A complete business plan is imperative to the lender. The business plan is used as proof of the business’ ability to repay the debt. Personal and business financial statements will also be required for the loan application. Depending on the type of loan, collateral may also be needed to secure the loan. Financial institutions vary, as will the documentation required in the process. It’s always best to check with the institution to ensure you have the information necessary to proceed.

When you choose to expand your business and decide a commercial loan is the way to go, it’s best to research the available options before beginning the process. Knowing the information needed and which type of loan will be best for your business needs will save time in the process. With a great many options in the world of commercial loans, it can be confusing without the proper information. It’s best to weigh all the options before decide which course of action is best for you.

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