Commercial Loan Definition
If you are a new or established business that needs financing, you are probably thinking about seeking a commercial loan. A commercial loan is given to entities that have been officially established as business structures (sole proprietorships, partnerships or corporations). There are a few things that you should know that may help make things clearer when you are applying for a commercial loan.
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Getting Approved
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In order for a commercial loan to be approved, the business owners or representatives usually have to present a full business plan complete with financial projections, and any information about how the business has operated in the past. Lenders also like to see collateral and a personal guarantee from one or more of the owners.
Uses
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Companies seek commercial loans to buy equipment, supplies, pay employees, and purchase or lease property, among a variety of other business needs.
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Getting a Commercial Loan
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Commercial loans are offered by both local and national banks in your community. Most banks have both a personal and commercial division to handle the two different types of customers.
Corporations
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Commercial loans given to corporations don't always require a personal guarantee. In this case, the corporate entity alone is held responsible for the debt and the company representatives are not penalized personally if the loan is not repaid.
SBA Commercial Loans
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The Small Business Administration (SBA) is a government agency that helps small businesses qualify for commercial loans. You generally have to be denied a commercial loan in order to qualify for an SBA loan (see Resources below).
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