A commercial loan is a financial document designed to provide capital to businesses for various purposes such as expanding the business, equipment purchases or to provide working capital. Unlike personal loans, commercial loans are tailored to meet the unique needs and challenges faced by businesses.
The application process for a commercial loan agreement requires comprehensive documentation. This includes financial statements, business plans and details about the intended use of funds, all of which are needed to determine whether a business has the ability to repay the loan. More information can be found here: www.parachutelaw.co.uk/loan-agreement.
According to Forbes, “Business loans are vital for entrepreneurs, startups and established businesses looking to grow or overcome short-term financial challenges”. Here we take a look at the different types available.
Types of Commercial Loans
Commercial loans come in various types, such as working capital loans, commercial bridging loans and commercial property loans, each serving different business needs.
A working capital loan is a short-term financing option designed to cover a company’s everyday operational expenses. This can be used to cover payroll, stock and inventory, and utility bills. These loans help businesses maintain smooth day-to-day operations and capitalise on immediate opportunities without disrupting their cash flow.
A commercial bridging loan provides short term funding to bridge the gap between the purchase of a new property and the sale of an existing one. This helps borrowers quickly secure a new property while awaiting the sale of their current asset, preventing delays in property transactions.
Commercial property loans are often referred to as commercial mortgages, and are used to assist in purchasing office spaces, retail outlets, or land for commercial use. Commercial property loans typically have fixed repayment terms and interest rates, allowing businesses to invest in property to support their operations and expansion.