Commercial finance is the term given to a huge range of business finance products that include both short and long-term solutions, offered by a provider external to the business.
Commercial loans utilize business assets to secure the loan and often come from traditional banks or credit unions, the Small Business Administration and Community Development Financial Institutions (CDFIs). Other options include crowdfunding and on-line lenders. Care should be provided to ensure that loan rates and terms are not overly risky for the business.
Startup businesses are unlikely to get a commercial loan because startup businesses do not usually have sufficient business assets to secure a loan. Instead, new business owners may need to use personal assets such as the value of their home, vehicles, savings accounts, etc. to secure a personal loan.
The Small Business Administration has loan guarantee programs that help specific types of businesses, such as rural, disaster recovery, and businesses that export.
What questions should I ask a lender?
Here are some questions to ask when screening commercial lenders:
- Are you an expert in my market?
- What is the average loan size you work on?
- How long does it typically take to close?
- What other loan options are available?
- What are the application fees — and how do they break down?
- Can I have a copy of my appraisal, credit report and engineer report?
- How much of my own money do I need to put down?
- How long can you lock in my interest rate?
- How much business insurance do I need?
What questions will lenders ask me?
- How much money do you need and what will you use it for?
- What is your credit score?
- How will you repay the loan?
- Can you put up collateral and a down payment?
Click here for a great article about these questions and more.
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