A commercial loan is a loan given by a bank for use in a business. These loans are typically used to expand the range of a business by acquiring land, capital, or equipment. In some cases, it is used to finance the acquisition of properties such as office buildings or retail centers.
When seeking a commercial loan, it is important to know the repayment options of a particular loan. Some loans are repaid on a monthly or quarterly basis. Borrowers have different needs so the repayment options are usually modified to suit their needs. Some examples of this include altering the repayment periods, or choosing from fixed or variable rates.
There are many different types of commercial loans available. Here is a brief rundown on some of the more common ones.
1. Commercial Real Estate Loans
Commercial real estate loans are typically utilized by large companies that intend to expand their range of business. It can be very costly to acquire real estate, especially ones that are in a good location. The loans are then used to fund the construction of commercial structures for business purposes. An example of such a developmental structure would be an apartment building or a shopping center. There is a vast assortment of commercial real estate loans available, so it is prudent to get one with an affordable interest structure.
2. Commercial Mortgage Loans
A commercial mortgage loan is similar to a commercial real estate loan in that it is used to buy buildings or property. An advantage that the commercial mortgage loan has is the flexibility it offers both the lender and the borrower. It is also considered as a very affordable option for getting a loan. A typical borrower can get up to 80% of the sales price of the particular property or real estate.
For the lender, they are able to stake a legal claim on a property until the loan has been paid. This reduces the risk incurred by the lender with regards to loan repayment. A lender such as a bank may offer flexible options designed to allow the borrower to repay the loan in an efficient and adequate manner. In worst case scenarios, insurance is used for covering the payments.
3. Seasonal Commercial Loans
Seasonal commercial loans are typically used during parts of the year where additional costs are incurred because of increasing demand. An example of this would be the holiday season. A loan is used to make sure that the demand can be met by producing additional goods or offering extra services.
