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Different Types of Commercial Loans

Written by Thomas Hammond

Saturday, 16 August 2008 08:51

by ThomasHammond

You may think that you already know a lot about financing because you have dealt with home and car loans in your personal life. Well, the world of commercial loans is an entirely different one. There a many options. Some sound familiar, but they are unique.

The company credit line is essentially what it sounds like. A lender gives a bank a rolling credit line. Most businesses use it to cover temporary cash flow issues. Banks have been known to call these lines, so you have to be careful.

Factoring is a financing option designed to deal with cash flow problems. You sell your receivables for a discount to a lender in exchange for immediate payment. While factoring is good for cash flow, it is an expensive option.

If you own it, you have cache in commercial financing. Lenders will loan a business money based on the assets held. Known by the obvious name of the Asset Based loan, the loan is secured by a security interest.

Many businesses run into situations where they desperately need money for a week or two to bridge a gap between spending and receiving money. Hard money loans fill this gap. They are done in a snap, but are very expensive.

Equipment for your business has value and lenders will finance based on it. While they will give you a loan to buy it, they will also give you a loan based on the value of the equipment. This is an example of the creativity in commercial financing.

Getting a loan for your home and an office building might seam similar, but they are not. Commercial property loans are much more complex. The issues are many including the amount of revenue the property will produce.

Businesses often need to make capital investments and improvements. As you might guess, there is a loan for this as well. The capital term loan is common and comes with a term associated with the life of the asset being improved.

Even the lenders in the commercial world are different. While there are banks, private money is a big part of the game. Investors pool their money and make loans just like banks. Make sure you consider this option, as they can offer good terms.

Business financing is much more involved than personal finance. Know what you are getting into. Expect everything to be ten times as complex. Lots and lots of paperwork is going to be required, but it is the road to business success.

About the Author:

In need of California commercial real estate loans? Visit Us at at CommercialLoanStop.com to find out your options.

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