Commercial loans are a special type of debt-based funding arrangement that is set up between a business and financial institution that is commonly utilized to provide the funds necessary for capital expenditures and/or to provide a monetary basis for operational costs.Commercial loans
may be obtained from either a bank or a private lender.Â Somerville Bank offers commercial loans to business owners that require money to supply their working capital, pay for the operation of their business, and/or cover other types of expenses associated with their business.
There are many types of commercial loans.
Each type has their own eligibility requirements, specific interest rates, and terms associated with repayment.
Types of Commercial Loans
Before applying for a commercial loan, it is important to know the types that are available to you. They are as follows:
- The Traditional Term Loan â€“ This is provided as a lump sum cash amount. You will be required to pay back the money provided, as well as the interest specified by the bank, over a set period of time. Most business owners opt for these loans when they have a relatively large expense associated with their business.
- The Short-Term Loan â€“ Business owners that have a small, one-time expense associated with their business may benefit from this type of loan. The amount borrowed may be as little as $10,000 or as much as $500,000. It is paid back â€“ with interest â€“ with daily or weekly payments in as little as 3 months or as much as 18 months.
- The SBA Loan â€“ This long-term loan is offered by the Small Business Administration. It has low interest rates that are backed by the government. It is ideal for business owners that are seeking to cover recurring expenses or a one-time expense.
- The Equipment Loan â€“ If a business owner needs to purchase equipment, this is the type of loan commonly pursued. The equipment will serve as the collateral on the loan.
- The Commercial Real Estate Loan â€“ This type of loan is for business owners that want to either buy properties or upgrade currently possessed properties. The property serves as the collateral on the loan.
- The Line of Credit â€“ This is a revolving line of credit that provides access of cash to a business owner. That business owner may then take out the amount of money that they need, when they need it. Interest is paid only on the amount drawn. As money is paid back, it is then added to the available credit line. This type of loan is much like that of a credit card. It is ideal for the business owner that has various expenses or irregularities in their cash flow.
- The Merchant Advance â€“ This is a lump sum of money that is repaid with a certain percentages of credit card transactions within the business each day. This is considered to be one of the most expensive of all commercial loan options and should only be utilized by those who are unable to obtain other types of financing.
If you have an interest in taking out a commercial loan, contact us today at: https://somervillebank.net/contacts/