The Ins and Outs of a Commercial Loan
Small businesses need funds to maintain and upgrade their professional services. These are what allow them to thrive within their industry.
However, there are times when enterprises need to borrow the funds necessary for growth and expansion. That’s where (most) commercial loans come in.
If you’re a small business owner, you may wonder how you can determine if the loan type you’re looking to borrow is the best for your needs.
Here’s everything you need to know to help you understand the ins and outs of commercial loans.
What to Consider?
Looking for reliable business lending, regardless of industry, can be challenging.
If you need to finance your projects and business needs, there are some things to look out for to secure funding that will fit your repayment conditions.
You should consider the following criteria when looking for a commercial loan:
- How much can I borrow? Consider how much you need, factoring in possible additional fees. These may vary based on the type of commercial lending you apply for. See which lenders can provide you with the amount you need.
- What terms can I agree to? Know how long your financing arrangement will last. Shorter loan terms can have higher periodic payments, while long terms can accumulate higher interest over time.
- What are the requirements? Some lending companies may require a good credit score before financing. Requirements vary, so it’s essential to inquire about them with your lender.
- How much will I pay? Interest rates will determine how much you’ll actually have to pay for your loan. Check for possible interest rate movements and other additional fees affecting your loan repayments. You may also have interest-only repayments and fixed or variable interest rates.
- What’s my credit score? A good credit score boosts your chances of getting approval. It can determine your loan amount, interest rate, and available financial options.
- Do I have assets I can use as security? Secured loans will require collateral with decent property value, which you can liquidate if you can’t repay your loan.
- What lender do I trust? You need to find credible lenders that can be trusted with your information and provide trustworthy deals.
What Is a Commercial Loan?
Business loans, or commercial loans, are funding options used to fund your business activities.
These activities include development finance, capital investment, funding a commercial property purchase, increasing your working capital, buying new equipment, etc.
Business loans are flexible, helping you fill the gaps in your cash flow and refinance other loans.
You can use them to obtain investments for retail and rental property.
You can get a commercial loan from different lenders in a way that’s much quicker than other options like bank loans. In fact, it’s probably the easiest way for a business to get the finance it needs to grow in its respective field.
How a Commercial Loan Can Help Your Business
Whether looking for commercial properties or looking into a possible investment for your business, a business loan can help you get the funds you need to obtain them.
These are the common benefits of these types of business loans.
- Since they’re often unsecured loans, you don’t need collateral to apply for them.
- You can retain complete ownership of your company property.
- You can use commercial loans for large sums of money.
- Commercial business loans can have lower interest rates and more flexible long-term payment plans.
- They provide business owners with working capital while maintaining lower overhead costs.
- They help finance and sustain your cash flow.
- You can purchase the equipment and stock to invest in your business.
- Access bond and equity markets.
Choosing the Right Lender
Knowing the commercial lending company you will work with is essential, as this can affect how you can repay their financing.
These are the factors you need to consider when applying for commercial loans from a lender.
- Research the lender. Check their ratings with the Australian Competition and Consumer Commission and other reputable organisations that can help you determine if these lenders are legitimate and reliable.
- Know the type of loan you need. There are many types of commercial loans, from residential property development to equipment funding. These can all help your business grow, but you need to choose the correct type of loan based on your context.
- Know their repayment terms. You’ll have to know how you will repay them and if it’s manageable for you. Do they have fixed or variable interest rates? Do they have a balloon payment scheme? Are there any minimum deposits required? These will help ensure you don’t end up missing your payments.
Commercial Loan Application Process
Here’s how you can successfully apply for commercial loan products.
- Apply For Your Loan. You can easily apply for a commercial loan in minutes online. Submit the necessary financial documents to help get approval.
- Get Your Approval. Your lender will contact you about what they can offer and approve if you meet their lending criteria. You may need to connect your account to the lending company for them to transfer the cash.
- Access Your Cash. The loan amount should be transferred to your account within the day as soon as it’s approved.
- Repay Your Loan. Note your repayment schedule and repay your lender on time to help you get better finance options in the future. The better you manage them, the better offers your business gets.
Your lender might need additional documents, depending on their terms and conditions.
FAQs
Let’s discuss the different questions commonly raised about commercial loans.
What Is the Difference Between a Commercial Loan and Bank Loan?
Bank loans usually require security so the lenders can be assured that there’s a way to repay your loan if you can’t do it with cash. This can be your commercial property or any asset your business owns.
They tend to be stricter with requirements and what you use them for. It may take longer to get the finance you need for your business if you go with this option.
On the other hand, commercial loans from alternative lenders are usually unsecured. So you can apply for them without the additional security. Your business can get the finance it needs, usually on the day you apply.
However, they can have a higher interest rate compared to bank loans to compensate for the lack of collateral.
Lumi offers different commercial loan options as well as Lines of Credit.
How Long Do Commercial Loans Last?
Depending on your loan amount, loan terms can usually range between 3 and 36 months.
Some can have a longer loan term, depending on how much you need to borrow.
You can speak with our team to learn more about how we can assist based on your circumstances.
Conclusion
Small businesses often need commercial loans to grow in their industries.
Whether for investment purposes or to obtain commercial property, these loans can give a business the capital they need when needed.
Lumi can help you get a commercial loan you need to upgrade your business needs.
