Understanding Commercial Loans

Commercial loans are for businesses.

A commercial loan is also known as a business loan. It is any loan given to a corporation, entity or individual who will use the financing to start, run or expand a business for a profit.

Types

Commercial loans can be broken down into two major categories: start-up loans and operating loans. Start-up loans provide the initial capital required to get a business up and running, while operating loans provide financing for daily needs or expansion goals.

Structure

Due to their large size, commercial loans tend to be long-term. They are issued in the name of the business, and they use the business's credit and financial resources as a source for approving the loan. Some start-up loans may be issued to individual business owners, but they are typically replaced by loans to the businesses in the immediate future.

Resources

If you are seeking a commercial loan, look to business lenders in your area. You may find the Small Business Administration helpful; it assists small business owners and start-ups secure loans and financing for their operations.

References

• Federal Reserve Bank of San Francisco: Commercial Loans
• Small Business Administration: Guaranteed Loan Programs