Purchasing new equipment, acquiring a new venture, or increasing your inventory to prepare for an upcoming period of high business activity all require you to have cash on hand, which is often difficult to have when you’re focused on investing in your business.
Some entrepreneurs will find areas of their balance sheet that they can cut from to afford the new venture, but you can only do this so many times before the integrity of your operation starts to suffer.
Rather than sacrifice your business to afford a growth opportunity, you can secure a commercial loan to finance your way towards success and outpace your competition.
There are many commercial loan options available to you, with each one offering unique benefits for certain situations, but everything can change depending on your lender.
Some will review your business’s financial information and decide financing you is a risk, while others will offer you favorable terms that can allow you to maximize the benefits.
You’ll need to be diligent in your search and speak with as many lenders as possible to find a deal that best suits your circumstances.
If you don’t know how to get a commercial loan, don’t worry; We’ve got you covered. Here’s everything you need to know before you start the process and how to get a commercial loan that will allow your business to grow without restraint.
1. What are the different types of commercial loans?
If you are looking to get a commercial loan, there are various commercial loan products that you can use to support your business growth. Here are a few options that you can choose from:
1.1. Term loans
A term loan is what most people think of when they hear “business financing.” This type of loan is given in a one-time, lump-sum payment that you’ll repay over the term outlined by your lender.
These repayment terms will depend on the lender you’re dealing with, as well as the interest rate, but you can speak with them before finalizing your deal to set up a plan that works best for you.
| Prons | Cons |
| Flexible terms, high borrowing limits, opportunity to build a relationship with your lender | Might have to pay the loan in full at the end of term, might require a down payment, costs more than funding the construction yourself |
1.2. SBA loans
SBA loans are backed by the government, meaning that they guarantee to pay 75% to 85% of the total borrowed amount if you default on the loan.
This extra layer of security means that a lender won’t have to assume too much risk when offering financing to your business, causing them to offer lower interest rates and more favorable terms as a result.
However, the underwriting process can be lengthy and difficult, which isn’t the best solution for business owners who need funding fast.
| Prons | Cons |
| Flexible terms, high borrowing limits, opportunity to build a relationship with your lender | Might have to pay the loan in full at the end of term, might require a down payment, costs more than funding the construction yourself |
1.3. Commercial construction loans
One of the more specific financing options is commercial construction loans: a lump-sum payment given to business owners to finance the design and construction of a structure.
While this type of financing won’t help a restaurant owner or manufacturing facility, construction contractors commonly rely on this option to perform their job-related tasks at an affordable price.
The high borrowing limits, ability to turn a sizeable payment into more manageable monthly payments, and lengthy repayment terms all allow contractors to meet the needs of their clients and, most importantly, turn a profit in the process.
| Prons | Cons |
| Flexible terms, high borrowing limits, opportunity to build a relationship with your lender | Might have to pay the loan in full at the end of term, might require a down payment, costs more than funding the construction yourself |
1.4. Commercial auto loans
If you are looking to get a commercial loan, another option that you can evaluate are commercial auto loans.
Some industries rely on trucks and vehicles to transport materials and conduct business activities, but they’re often expensive.
The rising cost of auto parts and vehicles has made it increasingly difficult for business owners to afford the vehicles they need to perform their occupational tasks, which is where commercial auto loans come in.
This financing option transforms sizeable purchases into more manageable payments and can help you secure the vehicles you need before another buyer swoops in.
| Prons | Cons |
| Flexible terms, high borrowing limits, opportunity to build a relationship with your lender | Might have to pay the loan in full at the end of term, might require a down payment, costs more than funding the construction yourself |
2. Will I have to offer collateral to get a commercial loan?
To get a commercial loan, another important thing that you will need to know is if you will need to provide a collateral.
Many commercial loan products are broken down into two categories: secured and unsecured. While this might sound confusing at first, the difference between them is actually straightforward:
2.1. Secured loans
A secured loan is a financing option that’s “secured” by collateral. Secured loans are given to organizations where the lender assumes an elevated level of risk by offering financing.
The collateral assures the lender will recoup some of the amounts they’ve let you borrow. You can offer various assets as collateral for your loan, such as vehicles, real estate, equipment, or other valuable, tangible assets.
2.1. Unsecured loans
An unsecured loan is a financing option that doesn’t require you to offer an asset as collateral. While these loans are considered “unsecured,” they’re technically secured by your accounts receivable.
The lender will evaluate your bank statements to determine if you’re profitable enough to repay the borrowed amount within the terms.
These are commonly the most sought-after loans for business owners, as no one wants to risk losing an important asset if they happen to default on the loan.
If you’re searching for an unsecured loan, don’t get discouraged by one or two denials. These commercial financing options are difficult to qualify for, but you might have better luck by working with an alternative lender over a bank or credit union.
3. How can I get a commercial loan?
This process might be a little more complicated than you might think. To get a commercial loan, you’ll have to:
3.1. Assess your borrowing needs
Understanding exactly how much you need to secure will prevent you from overextending the capability of your business or requiring additional financing.
3.2. Figure out affordable payments
You should consider: What payments can you afford to make without jeopardizing the integrity of your business?
Financing is a way to help you grow your business, not hurt it, and you can save yourself from a frustrating situation by understanding what payments you can make before you start the process.
3.3. Determine repayment terms
The repayment terms of your loan are critical, as you don’t want to run into a situation where you’re struggling to pay back the borrowed amount within the time frame.
Having a solid understanding of your business’s capabilities can help you set yourself up for success and, most importantly, save you from stressing about repaying your loan.
3.4. Evaluate your credit score
Your credit score plays a significant role in the rates and terms offered by lenders. If you have a lesser credit score, you might want to consider proactively strengthening it before starting the process.
3.5. Gather and prepare all relevant documents
You should gather your business bank statements, tax returns, and business plan, so you can have them readily available during the process.
3.6. Research and compare lender programs
If you are looking to get a commercial loan, make sure to speak with as many lenders as possible to ensure you’re getting the best deal. Alternatively, you can work with a lender marketplace like National to streamline your selection process.
You’ll have various lender organizations to choose from during your search. You can speak with traditional lenders, like banks and credit unions, which are the typical and most popular first step for entrepreneurs seeking financing.
However, banks and credit unions are notoriously difficult to qualify for, and the underwriting process is sometimes longer than business owners can afford to wait.
Additionally, these lenders will usually want to see positive cash flow in your business revenue statements, which can be difficult if you’re investing your earnings into your business.
A credit union or bank might not understand that you are producing revenue even though your cash flow is lesser, causing them to offer unfavorable rates and terms as a result.
Alternative lenders, on the other hand, can allow you to secure favorable rates and terms even if you’re investing your revenue into your business.
These lenders have less restrictive lending guidelines than banks and credit unions, allowing them to offer commercial loans to businesses based on other factors and help business owners find a deal that works best for them.
However, you should make sure to carefully research the lender you’re choosing to do business with, as there are a few shady organizations out there that may try to take advantage of your business.
Hidden fees, conditions hidden in the fine print, and other restrictions can make your financing journey a serious headache, so make sure you work with a lender you can trust.
4. Why should I get a commercial loan from a marketplace?
Searching for a lender takes time and dedication. You’ll have to sift through many different organizations and their programs to find one that fits the needs of your business, which isn’t easy.
However, rather than use the time you could have spent running your business searching for a lender, you can streamline the process by teaming up with a marketplace like National Business Capital.
At National, our 75+ lender marketplace connects you with competitive financing faster than with traditional lenders.
We specialize in saving time and resources for business owners, and we strive to form a relationship with all our clients to help them with financing challenges in the future.
Our team of experienced Business Finance Advisors take the time to learn about your business and the challenges you’re facing, then do the heavy lifting for you by finding a lender that can meet your needs.
Plus, our digital application only takes minutes to complete, allowing you to focus on what matters most—running your business. Get your commercial loan today!
5. National Business Capital Makes Finding a Commercial Loan Easy
Commercial loans can help you take advantage of the opportunities in front of you and allow you to take your business to the next level. Throughout your research, you’ll find that each lender is different, and they’ll all offer different rates and terms based on your business information.
Some might see your organization as more of a risky investment than others, which is why it’s so important to speak with as many as possible.
However, this takes time and resources to complete efficiently, something that not many business owners can afford while they run the day-to-day of their operations. Instead of finding the time to do your research, you can team up with National to streamline your search for financing.
National Business Capital, the leading Fintech marketplace offering competitive financing, is here to help connect you with a lender that can meet your needs.
With over 2,000 five-star reviews between TrustPilot and Google, over $1 billion funded for our clients, and three consecutive Best Workplace on Long Island awards, we’re uniquely capable of helping you finance your business growth and take your business to the next level.
Ready to get started? Fill out our streamlined, digital application in minutes and take the first steps on your financing journey.
Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.