Introduction: The Best Commercial Loans and Commercial Loan Rates
Running a business comes with its ups and downs. While there may be times of plenty, there may also be times when you need to figure out how to get a commercial loan just to be able to keep your business up and running.
When it comes to finding a commercial loan, many banks and other financial institutions have rather strict guidelines regarding who they will lend to and what the loan can be used for.
For commercial loans to be helpful to you and your business, you need to find commercial loan rates that are favorable enough to help you get through the rough times without miring your business venture in long-term debt.
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In this brief article, AdvisoryHQ will look answer the question, “What is a commercial loan?” We will then briefly analyze the different types of commercial loans before mentioning some of the benefits a commercial loan can offer to your business. Next, the average commercial loan interest rates and commercial loan requirements will be looked over.
We will then go on to offer a step-by-step guide to help you discover how to get a commercial loan before offering a review on three of the top commercial loans on the market today: US Bank commercial loans, Bank of America commercial loans, and Wells Fargo commercial loans.
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What Is a Commercial Loan?
Commercial loans are loans that are given to businesses. While a commercial loan isn’t offered to startup businesses, commercial loans can be used by established businesses for a number of different uses.
According to Investopedia, a commercial loan is “granted to a variety of business entities, usually to assist with short-term funding needs for operational costs or for the purchase of equipment to facilitate the operating process. In some instances, the loan may be extended to help the business meet more basic operational needs, such as funding for payroll or to purchase smaller supplies that are used in the production and manufacturing process.”
A commercial loan, then, is used by small to medium-sized businesses to help them get through lean times, finance an expansion or other type of growth or cover the cost of expensive machinery or equipment needed by their business venture.
Commercial loans are offered by most major banks and some credit unions. Commercial loan rates usually follow from the prime lending rate of the moment. However, a commercial loan broker can help you search for the top commercial loan interest rates and commercial loans with the best terms and conditions for you and your business.
Types of Commercial Loans
There are a number of different types of commercial loans available to your business. The type of commercial loan that you choose will depend largely on what your business plans are for using the commercial loan. Below, we’ll look at four different types of commercial loans available to you and your business.
Business Line of Credit
A business line of credit is a type of commercial loan that will allow your business to draw money as you need it until you reach the limit of your loan. A line of credit commercial loan is best for businesses that have extended expenditures that will be spread out over time.
Once you make payments on your line of credit commercial loan, many lending institutions may very well allow you to continue to draw more money. In this way, line of credit commercial loans allow you access to funds without having to go through the sometimes tedious process of applying for a loan each time you need funds.
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Accounts Receivable Loan
An accounts receivable loan is a type of short-term commercial loan that allows you to pay monthly operating expenses while you are waiting for back payment from customers.
Sometimes, customers are late on their payments, and it can be frustrating to have to suspend your business activities while waiting for the checks to start rolling in. An account receivable commercial loan depends on you having regular customers with a good credit standing.
Long-Term Commerical Loans
Long-term commercial loans are a lump sum of cash that is paid all at once and must be paid back over a loan term, usually between 5 and 15 years. These types of commercial loans are best to help your business finance large expenditures, such as machinery, new real estate purchases or other expensive equipment.
A commercial loan broker may be able to help you find long-term commercial loans with more favorable commercial loan interest rates.
Real Estate Commercial Loans
Lastly, real estate commercial loans can help your business with the purchase, rent or lease of a piece of property where your business operates. The collateral for these types of commercial loans is usually the property that you purchase.
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Benefits of Commercial Loans
There are a number of benefits to finding the best commercial loans that offer competitive commercial loan rates. The best type of business is one that is continually growing; however, sometimes a timely influx of capital is the best (and only) way to keep your business growing.
A commercial loan can help to finance a needed expansion of your business. For example, the owner of a small bakery may want to find out how to get a commercial loan so that he or she can open up a new branch across town or move the business to a better location.
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Startup businesses may only get limited funding through a government-backed business loan at first. While it is smart to start small, once you’ve proven that your business will be successful, you should be actively searching out commercial loans that can help your business take off.
A commercial loan broker may be able to offer help and guidance as you search for the best commercial loan offering the best commercial loan interest rates for your business idea.
Furthermore, the economic uncertainty that defines the times we live in may make your business suffer through lean times as well. Many businesses that don’t know know about commercial loans or how to get one may very well suffer serious losses that put their business in jeopardy.
A timely commercial loan offering quality commercial loan rates may very well be the only way to help you weather the storm.
Typical Commercial Loan Interest Rates
Commercial loan interest rates generally follow the market. However, it is well worth your time to search for the best commercial loan rates available. The commercial loan rates you find will also depend on your credit standing and how successful and prosperous you can show your business to be.
Furthermore, commercial loan interest rates will depend on how much you want to borrow and the term of the loan. A long-term commercial loan will probably offer a lower interest rate than a short-term account receivable commercial loan.
Even if you have less than optimum credit, you should be able to find commercial loan interest rates at a maximum of 30% APR, which is still quite high. It will, however, take time to search for the best commercial loan rates.
If you feel that you simply don’t have the time to scour the Internet to search for the best commercial loan rates, a commercial loan broker may very well be able to help you find a commercial loan interest rate that is best for you.
According to Forbes magazine, “Some brokers actually do help, offering sage counsel to small business owners to help them find the loan that best suits their needs. These respectable brokers typically earn modest fees of 1% to 3%, and that fee is paid by lenders without having any impact on the cost of the loans to borrowers. But, small business owners are increasingly likely to encounter brokers who are out for themselves. In fact, unscrupulous players have emerged like wolves in sheep’s clothing, and are deliberately building tricks and traps into the loan process to pad their pockets and ensnare borrowers in a cycle of high-cost debt.”
If you do choose to use a commercial loan broker, make sure that the broker has an honest reputation and won’t charge excessive “finder’s fees” for helping you manage, find, and apply for your commercial loan.
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Commercial Loan Requirements and How to Get a Commercial Loan Step by Step
While every bank or financial institution offering commercial loans will have its own set of commercial loan requirements, there are certain things that every business owner will obviously need.
First of all, one essential commercial loan requirement is that you and your business have a decent credit score. The more creditworthy an applicant for a commercial loan, the more likely he or she will be to find the best commercial loan rates.
If your credit score allows you to apply for commercial loans, your business will then have to show balance sheets and other documentation that prove that your business has a reliable and steady cash flow. One of the most basic commercial loan requirements is that your business not be running in red numbers.
Once you’ve shown that your business has a reliable cash flow and you have been pre-approved for a commercial loan, you’ll then have to show what you plan to use the commercial loan for. Do your homework before even setting foot in the bank and make sure you have a detailed expense plan for the commercial loan to help you with operational costs, an increase in inventory or the one-time purchase of expensive equipment.
Once the bank approves you for the commercial loan and you’ve settled on the best commercial loan interest rate and term, you’ll most likely need to provide monthly or quarterly financial statements throughout the duration of the commercial loan to show that you are keeping up with your loan.
If you used the commercial loan to finance expensive equipment or machinery, the bank may also require you to take out insurance on those items.
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Top Commercial Loans on the Market Today
If you think that you are ready to start researching the best commercial loans on the market and aren’t quite ready to turn to a commercial loan broker, consider these top three banks offering quality commercial loan rates.
- US Bank Commercial Loans
U.S. Bank commercial loans offer some of the most competitive commercial loan interest rates out there. Furthermore, commercial loans with U.S. Bank can help your business with many types of expansion and growth opportunities. You can apply for up to 2 million dollars.
Furthermore, US Bank commercial loans have a rather simple application process and offer fixed monthly payments on principle and interest. Full amortization can be for up to seven years, allowing you to spread out the commercial loan over a considerable amount of time.
- Bank of America Commercial Loans
Bank of America commercial loans is a preferred lender of the Small Business Administration, meaning that you’ll most likely be able to find a quality interest rate on your commercial loan.
The Bank of America commercial loan website offers a helpful tool to help you determine which type of commercial loan is best for you. It offers a number of popular financing options so that your business can find commercial loans for whatever type of borrowing needs you may have.
- Wells Fargo Commercial Loans
Wells Fargo commercial loans also offer quality commercial loan rates. The commercial loans offered by the Wells Fargo commercial loan program offers a wide array of financing options. The loans can be used for everything from equipment financing, real estate financing or capital finance.
How a Commercial Loan Can Work for You
Whichever bank or financial institution you choose for your commercial loan, doing your homework and research will help you find the best commercial loans for you and your business. By discovering how to get a commercial loan, your business may very well be on track to an impressive period of growth and prosperity.
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