If you need funding to start a small business, expand your brand, buy equipment, or renovate your shop, you can always turn to commercial loans. A commercial mortgage is a debt-based funding arrangement between businesses and lenders to fund major business expenditures.
Your local bank is one of the most common places to start when looking for commercial lending. However, banks are not small business friendly. Aside from the basic requirements – excellent credit score and established business, banks prefer large-sized loans over $300,000.
If your local banks don’t work for you, there are other commercial loan options you can consider. Depending on your type of business, credit history, business plan, and annual revenue, you can avail of the following commercial loans:
Traditional Term Loans
A traditional term loan is a lump sum of capital at a fixed or variable interest rate which you pay back with regular repayments until the loan is repaid. This type of loan works well if you need large business investments ranging from $5,000 to $5 million. Traditional long-term loans usually have repayment periods of 10, 20, or even 25 years.
To qualify for a traditional term loan, you should have a credit score of over 600, an established business operating for at least two years, and an annual revenue of $100,000. If you are at the top end of these requirements, you can qualify for a traditional term loan with the lowest interest rates.
If you need a small loan for an emergency or an unexpected business expenditure, you can avail of short-term loans. Short-term loans range from $2,500 to $250,000 and are payable from 3 to 18 months.
Short-term loans are a great source of quick cash or emergency funds as lenders can process these loans quickly. These loans are also easy to qualify for – credit score of 500, a business operating for at least a year, with annual revenue of $50,000.
Business owners looking to buy equipment for their businesses can avail of the equipment loans. With equipment loans, the lender will finance and supply you with the equipment right away. Moreover, you don’t need collateral for this type of commercial loan as the equipment itself will serve as the collateral.
Equipment loans are easy to qualify for as the equipment is the collateral for the loan. This is why lenders give more importance to the type and condition of the equipment than they do about the borrower. However, you won’t get 100% financing if you have a low credit score and low business revenues, which means you need to make a down payment to qualify for the loan.
Commercial Real Estate Loans
If your line of business is real estate and you need financing to buy or upgrade commercial properties, commercial real estate loans can help you. Commercial properties can be costly so banks or mortgage lender Grand Prairie can reach up to $20 million and a repayment term of up to 25 years.
Just like equipment loans, the commercial property will serve as the collateral. With this collateral, lenders charge as low as a 5% interest rate as they have more assurance of getting their money back.
To qualify for a commercial real estate loan, you should have a high credit rating, at least two years in real estate business that generates high revenue. Lenders will allow a lower credit rating as long as you have high business revenue.