There are times when you find yourself in a frustrating situation, which leads to anger, especially if it’s related to money. For example, you and your best friend both decided to start a new business, so you both took a commercial loan from the bank. Now when you compared your interest rates and other gains, your friend was in profit. It was because his private commercial mortgage lenders advised him to get an SBA (Small Business Administration) loan for maximum benefits.?
You see, how proper knowledge and guidance in the loan sector can lead to, ?a huge profit?. To stay clear from such further frustrating situations, we bring you a perfect guide to different types of commercial loans with their benefits. So, wait no more and dive in!
- SBA loans
If you are a small business owner, planning to be one, in the near future and need financial support, SBA loans will be the right choice for you. The USA (Small Business Administration) SBA loans help small business owners build and spread their companies, by lending required capital. These loans are set under guidelines and reduce the lender risk.
Getting an SBA loan can be difficult, as loan lenders don?t want to take a risk. Thus, to avoid getting rejected, make sure all the requirements are fulfilled before applying for the SBA loan.
Benefits
- It has lower interest rates
- It has a longer repayment tenure
- It requires a lower down payment than other business loans
- It can be used to fund multiple commercial purposes
- Commercial real estate loan
As the name itself suggests, commercial real estate loans are specifically used to purchase a property for commercial purposes. These loans can either be used for buying a new business space or for properties as an investment. Commercial real estate is basically an umbrella term, and you can find more sub-types under it, like permanent loans which are used as the first mortgage on a commercial property.
A commercial real estate loan is secured by a lien on the purchased commercial property. So, if the borrower fails to repay instalments timely, the lender has the right to seize the property.
Benefits
- It has a low-interest rate.
- You can earn substantial gains to buy a commercial property.
- The bought commercial property can also be rented out.
- It is a long-term loan, from 15-30 years.
- Business line of credit
A type of commercial loan that has a great similarity to a credit card. Business line of credit works best for business owners who are unsure of the exact capital they require. In this loan type, you would not get a lump sum upfront, like in traditional loans, instead, you will be able to draw an amount of your wish from your line of credit. And when you reach the maximum granted amount, simply repay the capital and restart the whole process again.
The best part about a business line of credit loans is, they don?t charge interest on the maximum qualified amount, but on the amount, you withdraw.
Benefits
- You can easily access the fund you need.
- Generally is profitable due to low-interest rates.
- They are very flexible and can be used according to the borrower?s will.
- You can return the capital in case you can?t use the whole amount.
- Equipment financing
Equipment financing is one of the most opted commercial loan types. As its name implies, an equipment financing loan is a capital borrowed concerning only equipment. Since machinery and equipment come at a colossal price tag and not all business owners can afford them. Thus, equipment financing loans will give you financial support to get the required equipment.
Benefits
- It helps you buy equipment at a fixed cost for a fixed period of time.
- Provides tax depreciation benefits.
- It manages risk and hedges against sudden inflation.
- You can access the equipment according to your needs.
- Commercial construction loan
A commercial construction loan is supposedly similar to a real estate loan. However, the difference lies in its use. It is designed to cover the cost of designing and building the commercial property which has not yet started. In situations like rising construction costs and material costs, this commercial loan type gives you control over the situation and you can timely complete the project.
Benefits
- It leaves no possibility of lag in payroll.
- This loan comes in handy for managing a growing team.
- A construction loan gives you control over construction, you get what you have envisioned.
- Cash flow remains constant throughout the construction process.
The following are five basic types of commercial loans. Share this post with your friends and family and let them know you care for their pockets and mental health.
As the editor of the blog, She curate insightful content that sparks curiosity and fosters learning. With a passion for storytelling and a keen eye for detail, she strive to bring diverse perspectives and engaging narratives to readers, ensuring every piece informs, inspires, and enriches.
