There comes a time when a small business can use external help to outgrow its working capital, and streamline its cash flow. Businesses need financial assistance such as Commercial Loan to cover large-scale purchases and everyday expenditures. A commercial loan is a type of small business loan and it is technically a debt-based financing agreement between a lender and a small business. You get the funding you need for your business growth and of course, you repay it with full interest over a period of time. Commercial loans from an alternative lender will be less time consuming as compared to traditional loans. Only provide the required documents and get rapid access to loans.
In 24 hours
Where can you get a Commercial Loan from?
Banks are the first stop of borrowers; most business owners go with the bank they are already associated with. Most of the businesses have a savings account, business checking account, and credit card to manage sale transactions. In order to qualify for a commercial loan from a bank, you must have a flawless financial report. Banks offer loans to businesses generating annual revenue of $1 million, with a credit score of 700+, and to businesses running for at least a couple of years. Fulfilling these criteria will get you a commercial loan from the bank.
Since banks follow a meticulous regime, what should be done by business owners with weak financial worth? Alternative lenders are offering business loans at affordable rates and flexible payment terms to provide equal and just opportunities to small business owners to hire, invest, upgrade and remodel as they please. Here are some funding options offered by alternative lenders:
A merchant cash lender will give you access to a lump sum of money, and a lender will take a cut of money from your sales via a credit card until the complete debt is paid. The lender will have a chunk of your money according to the sales of your business; if your business is having a good week, the lender will take a huge cut. What if your business isn’t making any money? The lender will take a small share of money from your sales.
Merit: Merchant Cash Advance is a reliable funding option; it is designed to deal effectively with the seasonal highs and lows.
Demerit: Its factor fee and APR is higher than other funding options; it is an expensive finding option.
This is the most common funding option used by business owners. The lender offers you money, you pay it back with interest within the due date. A traditional term loan usually has longer payment terms. These loans are offered to businesses running for at least two years and are generating $100,000 in annual revenue.
Merit: A good option to satisfy temporary and short-term financial needs.
Demerit: Strict eligibility criteria.
An invoice factoring isn’t technically classified as a loan. The business sells its unpaid finances to the factor, and a borrower gets paid in return minus the charge fee.
Merit: It provides adequate working capital to bridge the financial gap.
Demerit: An expensive funding option.
A business line of credit works like a credit card. The lender gives access to money and borrower can take as much money required keeping the limit in mind. The interest is applicable only of the funds taken out of the account. Once the debt is cleared, the amount is recharged.
Merit: Flexible payment terms.
Demerit: Fees and extra charges.
Equipment is the basic need of every business with a physical store. If you are looking for a commercial loan because you need funds to purchase equipment, then an equipment loan or financing
Merit: Low Annual Percentage Rate
Demerit: High down payment.
How does Commercial Loan work?
Disruption in the cash flow and inadequate working capital hinder the growth of the business. A commercial loan can help eliminate financial problems and give you funds to hire and train staff. With extra funds, you can launch an advertising campaign or stock up on inventory as well.
Technically, a commercial loan is a loan offered to a business rather than an individual. These loans come in the different range:
- Short-term loans: 30 days to one year
- Long-term loans: 15 to 30 years
- Secured (backed by the collateral)
- Unsecured (don’t require any collateral)
Alternative lenders don’t ask for a long list of financial documents from the borrowers. In addition to this, a traditional lender asks you to ensure the financed equipment.
Benefits of Commercial Business
Commercial loans can cover the expenses of equipment financing or cost of remodeling and business expansion. Apply for a Commercial Loan keeping the following benefits in mind:
Merchant Advisors’ Commercial loans come with higher loan amounts giving you a golden opportunity and flexibility to utilize the loans as required for your business.
Our commercial loans can enable you to explore new marketing opportunities and take better advantage of digital media.
We also provide flexible repayment terms for our commercial loans. Rather than locking you into a fixed repayment schedule, we create a custom-tailored repayment plan that will suit your business needs.
We process and underwrite commercial loans quickly – faster than a bank. We use online lending technology to quickly process the loan application and provide decisions in just 24-hours. Once your application is approved, you can secure the commercial funding you need.
A small change in appearance can provide better customer experience, enhance safety and improve business efficiency. A commercial loan can enable you to make necessary renovations and give your business a new look and feel.
The bigger you are, the more you need to invest to stay competitive and run smoothly. With our commercial loans, you can invest in new opportunities like equipment purchases, and technology integration, fulfill new contracts, etc.
What Factors do Lenders Consider?
As the eligibility criteria vary from lender to lender, but some metrics are common amongst them all. Strive to improve the following domains and enhance your chances of approval:
The first and most crucial factor a lender considers before approving a commercial loan your business is making per year. Business annual earnings are a crucial factor a lender consider before approving you for a commercial loan. They want to see a constant flow of cash, so you can pay for operating expenses and cover your loan payments. Lenders will also require a business’ Profit & Loss Statement and tax returns to verify the revenue.
Lenders also need to know how much money you have on hand. They want to know how well you’re managing your earnings. If you have a bank balance equivalent to three months of your business’s operating expenses—including your loan payment, chances are you will qualify for commercial lending.
Time in business is another factor a lender considers when reviewing a commercial loan application. If you’ve been in business for two years or more, your chances of approval will go up. They hesitate before lending money to the startups as they fear the borrower won’t be able to return because of low annual revenue.
A personal and business credit score actually matters when it comes to funding your small business. It demonstrates how trustworthy you are as a borrower. If you can manage your personal finances effectively, it means you can manage your business finances as well. For this reason, lenders take your personal credit into account —especially if you run a startup.
Scoring well on all of the above-mentioned metrics will brighten up your chances of loan approval.
Types of Commercial Loans
Alternative lenders offer multiple types of Commercial Loans to meet the needs and requirement of various business owners.
This commercial loan has flexible usage criteria and payment terms exceeding 5-10 years. In order to secure this loan, you must have a credit score of 700 and been running a business for a year. The interest rate will vary according to market trends.
Construction loans can help cover material and labor costs. If you are thinking about an office upgrade or are remodeling your house, a construction loan can help. If you bought new land and are thinking about constructing something over there, the purchased land will act as collateral.
The money from hard money loan comes from the third party investors they take the risk by looking at the commercial value of the property, not at the financial credibility of the borrower. Hard money loan can be easily accessible hence it comes with a high-interest rate and has the payment terms ranging from 6 months to a year.
As compared to Hard money loan, Bridge loan comes with lower interest rates. In order to qualify for this loan, your business credit score should be of 650. These loans are a better option for renovations and remodeling of business.
A line of credit to help you purchase or refinance a commercial property with interest only being charged on the balance drawn. The interest rate of the Commercial Equity Loan varies according to the market trend and borrower’s credibility. This commercial loan allows you to drawn loan up to $10,000, and its payment terms last more than 5 years.
Commercial variable rate loans have no ongoing fees and provide affordable and flexible interest rates. Loan terms are usually for 15 years, and you can withdraw $10,000 at one time. As a borrower, you can pay the loan with interest in the coming 5 years.
Commercial fixed rate loans also have no ongoing fees and provide affordable interest rates. It comes with flexible payment terms of up to 5 years. The fixed loan term is of 20 years, and you can redraw a loan only at the end of each term. Moreover, you are obligated to pay the loan within 5 years.
- Apartment Loans - Apartment Buildings and Multifamily properties with 5 units or more.
- Office Building Loans - Get competitive rates on office building loans.
- Hotel Loans - Creative financing solutions to get the funding you need.
- Retail/Strip Mall Loans - To meet the personal need and requirements.
- Industrial/Warehouse Loans - o manage the holding and storing costs.
- Self-storage Unit Loans - To purchase, renovate and reconstruct your self-storage units.
- Medical Loans - Get funds to purchase updated equipment for your center.
Assess your business needs and apply for the one that satisfies your business needs.
Why is Merchant Advisors the best?
We've learned a lot by working with thousands of small business owners like yourself. With Merchant Advisors, you not only get capital for your business, but also get credit resources, affordable prices, renewal benefits, early repayment savings and, best of all, a peace of mind.
To get started, fill out a 3 step online loan application, enter your business information, and you will get a decision in a matter of an hour and funding in 24 hours.
Building a solid credit profile is important to gain access to funds at reasonable rates. We help you with your credit by reporting it to the credit bureaus.
You will get an email, immediately, mentioning the current status of your loan. Our expert financial advisors will reach out to you; they work with business owners every day to address emerging financial challenges while running a small business.
We offer discounted fees on loan renewals and low prices exclusively on small business loans for our loyal customers. We are always ready to help now, or anytime in the future.
When applying for any business loan you are required to offer recent bank statements, and tax and business returns but commercial loans require a couple of more documents. We have compiled a detailed list of the required documents:
- Recent bank statements
- Balance sheet
- Profit & loss statement
- Personal and business tax returns
- Personal and Business information
- Time in business
- Why do you need the loan?
- Business plan
- Business debt schedule
- Collateral documentation
- Cash flow forecast
Check in with your potential lender and have a file of financial documents ready. Provide these documents to them, give them access to your credit score report and you are all set to secure a commercial loan.