Commercial Loans

Commercial loans are the loans that are used to finance a business and the purpose for availing the loans can vary from one business to another. These loans are available both in the form of secured loans as well as unsecured loans. The borrower can either opt for the fixed rate of interest or can select the variable rate depending on their financial needs and business goals. It is imperative to maintain some of the documents pertaining to the business turnover, business plan, mortgage details and capital investment.

Business owners or even entrepreneurs who dream of making it big in the business world understand the importance of commercial loans. They are aware that timely commercial loans can not only help them run their businesses smoothly but also help them expand their businesses. Thus, it is not wrong to say that commercial loans have always been the lifeblood of business houses that look forward to timely financing for achieving a wide variety of business goals.

There are several uses of business or commercial loans but some of the common ones include purchase of new offices or buildings, purchase of machinery, expansion of operations to other locations and also meeting operational costs. The processing of commercial loans differs from one lender to another and it is advisable to apply for pre-qualification so as to be clear about the amount of loan one can expect. The pre-qualification move also clears the picture about the affordability of a loan and the borrower can take all the necessary financial decisions that would lead up to the successful repayment of the loans.

Lenders appoint loan officers who would guide and review the commercial loan applications. The loan officer is supposed to scrutinize some of the vital documents that would qualify a borrower for a commercial loan. Some of the documents that are reviewed prior to loan approval are the credit history of the borrower, collateral, repayment ability of the borrower and also the reason behind seeking the loan.

There are other documents that would finally be evaluated before the approval of commercial loans and they are as follows:

Business plan – This is a very important document that is required in case of financing a new business or a start up. Cash flow projections for up to 24 months must be included in the business plan. This will determine the feasibility of the business in the long run.

Loan request – Amount of loan required has to be made clear to the lender and also the type of loan along with the working capital needs to be mentioned.

Financial statements – Business owners need to provide their personal financial statements in case they are holding more than 20% of the company’s stake.

The borrowers should always be ready to answer questions pertaining to their businesses and convince the loan officers. It is also advisable to weigh the option variable and fixed rate depending on the financial goals of the business.

Commercial loans are generally approved between 1 to 5 days and borrowers might also be asked to furnish other details. Once the scrutiny of all the documents is satisfactorily completed, the loan is disbursed through draft, wire transfer or cashier’s check.