Types of Commercial Loans: What's Best for Your Business?
06/07/2023
Types of Commercial Loans: What’s Best for Your Business?
Financing your business can often be difficult, especially for a first-time business owner. With many different financing options, it can be challenging to determine which makes sense for you. When looking for a loan, make sure you consider your business’s specific needs and any long-term obligations. Here are a few types of commercial loans to consider.
Commercial Real Estate Loan
If your business needs a physical location, a commercial real estate loan may be able to help you. In most commercial real estate loans, the property serves as collateral to secure the loan. Qualifying for this type of loan and what terms are offered to the borrower depends on the value of the property versus purchase price, debt of the business, credit score, cash flow, and size of the down payment.
Equipment and Machinery Loans
Depending on your business’s industry, necessary equipment and machinery can be expensive. Equipment and machinery loans can be helpful. Like commercial real estate loans, the machinery serves as collateral for the loan. The presence of collateral can lead to lower interest rates and better repayment terms. Typically, the life of the loan will correspond with the expected life of the equipment. Note: These types of loans usually do not cover vehicles.
Operating Loans and Lines of Credit
Operating loans and lines of credit let the business owner borrow funds on an as-needed basis. These types of commercial loans operate much like a credit card where the borrower has a limit, and they use that credit limit as needed. Interest is only accrued as the line is used, saving the borrower money. Lines of credit often work well for seasonal businesses or businesses looking to build credit.
Business Term Loans
Business term loans refer to loans used for business related needs like working capital, transportation, inventory, facility improvements, and more. This is the most traditional type of loan for a small business. A business will borrow from a traditional bank, credit union, or online lender. The borrower will repay over a fixed period, often with a fixed interest rate, and they can use the funds for a variety of purposes, as stated above. Business term loans are a great option for businesses looking to expand.
These are just some of the financing options available to business owners. Whether your business is looking to purchase real estate, expand, or acquire new equipment, The Savings Bank can help! Visit www.thesavingsbankohio.bank/loans/business-loans to learn more or visit https://www.thesavingsbankohio.bank/product/commercial-team.html to meet our Commercial Lending team.
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Sources:
13 Types of Business Loans: Find The Best Loan – Forbes Advisor
10 Types of Business Loans: Compare Financing - NerdWallet
Types of Business Loans and How to Apply (uschamber.com)
8 Small Business Financing Options: Get The Funding You Need – Forbes Advisor