Commercial Loans

What Is a Commercial Loan?
A commercial loan is a debt-based funding arrangement between a business and a financial institution such as a bank. It is typically used to fund major capital expenditures and/or cover operational costs that the company may otherwise be unable to afford. Expensive upfront costs and regulatory hurdles often prevent small businesses from having direct access to bond and equity markets for financing. This means that, not unlike individual consumers, smaller businesses must rely on other lending products, such as lines of credit, unsecured loans or term loans.

KEY TAKEAWAYS
A commercial loan is done between a bank and a business, used to fund operating costs and capital expenditures.
Many commercial loans require collateral, such as property or equipment.
Companies generally have to provide financial statements to prove their ability to repay.
Although most commercial loans are short-term, they can be “rolled,” or renewed to extend the life of the loan.