What are commercial business loans? – Forbes Advisor

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Commercial business loans provide financing for business expenses, such as equipment or real estate. When you borrow, you usually get the full amount up front and pay it back over a period of time, often at a fixed interest rate.

Compared to small business loans, which have smaller loan amounts, commercial loans typically come with large loan amounts and are aimed at medium to large, established businesses.

Although lenders set their own borrowing criteria, they generally require at least two years of business, good credit, and annual income demonstrating the ability to repay debt. Additionally, commercial business loans typically require collateral – a business asset that secures the loan and which the lender can repossess if the business defaults. The specific collateral depends on the type of loan.

Types of Commercial Business Loans

Some lenders offer specific types of commercial business loans that are designed for certain purposes. Some common business loans that might be right for your business include:

  • Equipment financing. If you need to buy equipment for your business, you can finance it with a loan. This type of financing is usually secured against the equipment, which means the lender could seize it if you don’t repay on time.
  • Commercial real estate loan. Like a mortgage for your personal home, commercial real estate loans help you buy or redevelop commercial property. Ownership serves as collateral.
  • Commercial car loan. This type of loan could help you buy vans, trucks or other vehicles for your business. A commercial auto loan typically uses the vehicles you are financing as collateral.
  • Ready for commercial construction. These loans help you pay for renovations or new buildings, whether it’s for offices, a multi-family real estate investment, or another project. The property likely serves as collateral for the loan.
  • Relay loan. Often used in commercial real estate, bridge loans tend to be short-term loans that help you cover a funding gap and use the property as collateral.
  • Inventory financing. You may be able to use inventory financing to purchase products and materials in bulk before selling them. Inventory loans are often secured by the products you purchase.

Where to find commercial business loans

Many banks offer commercial business loans, but they are not the only lenders to do so. You can also explore online lenders, the US Small Business Administration (SBA), and even some nonprofit lenders.


Many banks offer business loans to business owners. Most require the business owner to have good personal credit (FICO score of at least 670); they can also check your company’s credit rating if it has one. Depending on the lender, you may also need to meet other requirements, such as being in business for at least two years, securing your loan with collateral, and minimum annual income requirements.

Online lenders

You can also check online lenders for commercial business loans. Online lenders tend to have faster application processes and funding times than banks. Plus, they might have looser borrowing requirements, which might be helpful if you’ve been in business for less than two years.

Before borrowing from an online lender, however, make sure the lender is registered with an appropriate agency and has a good reputation on a trusted review site such as the Better Business Bureau (BBB) .


The SBA partners with lenders to provide government-backed business loans to business owners. It offers 504 and 7(a) loans up to $5 million and microloans up to $50,000.

Eligibility requirements vary, but your business must be defined as a business by the SBA and you cannot be behind on other debts. If you qualify, you can find an SBA-backed loan with competitive rates and fees, as well as receive guidance and training in running your business.

Non-profit lenders

If you are looking for a microloan (usually $50,000 or less), you may be able to borrow from a nonprofit lender or other microfinance organization that offers an alternative lending model. As mentioned, the SBA also supports microloans from its partner lenders.

While some nonprofit lenders only serve specific states or regions, there are others that serve businesses nationwide. Be sure to confirm with any non-profit lender before applying for funding.

How to get a commercial business loan

The following steps can help you access a business loan for your business.

1. Understand your situation

Before you sit down with a lender, make sure you’re ready to discuss your business details and why you need financing. A lender will want to know why you will use the loan and how it will help grow your business.

Clarifying your financial situation will also help you determine what type of loan is best for you, how much you need to borrow, and how you will repay the loan.

2. Determine your loan amount

Depending on your business situation, determine how much you need to borrow to meet your business goals and maintain an affordable monthly payment. Be careful not to borrow more than you can afford to repay, or your business loan could end up hampering your business growth.

3. Check your eligibility

Lending criteria differ from lender to lender, but most lenders require a good credit rating and a minimum of two years in business. Although not all lenders disclose their required credit score, a good score starts at 670 in the FICO scoring model.

You can check your credit score for free on various online credit reporting websites. It’s also worth ordering a free copy of your credit report from AnnualCreditReport.com to check for any errors.

It’s likely that your lender will also require you to meet a minimum annual income requirement. Although it varies by lender, you can expect requirements of around $250,000 per year. This helps the lender ensure that you can afford to repay the loan in full and on time.

4. Compare lenders

Take the time to compare lenders to find the best deal for you. Some lenders may offer more competitive rates, while others offer higher loan amounts or more flexible borrowing criteria.

As mentioned, it’s always a good idea to check that a lender is reputable with a site like the BBB or Trustpilot.

By shopping around, you can find the loan that’s best for you and your business.

5. Apply for the loan

Once you’ve found a lender that works for you, it’s time to apply. Most lenders will ask for specific documents related to your business, including tax returns, financial statements, accounts payable documents, and any collateral required to secure the loan, if applicable. You may also need to provide a business plan outlining your goals and how the loan will help you achieve them.

If and when you receive an offer, be sure to look at the terms of the loan. Review your interest rate as well as your monthly payments and loan terms. If you’re not sure what you can afford, use the Forbes Advisor business loan calculator to figure out what’s best for your budget.

6. Start repayment

Once your loan is funded, you’ll likely start paying it off with fixed monthly installments over a set period of time. Consider setting up automatic payments so you never miss a bill. By keeping up to date with your loan payments, you can build your credit score while avoiding delinquencies and defaults.

Alternatives to Commercial Business Loans

Most commercial business loans provide initial lump sums that you repay monthly over several years. If this type of long-term loan is not for you, you may have other options, including:

  • Business lines of credit. Similar to a business loan, a business line of credit helps you access the funds you need. Instead of receiving all the money up front, however, you can draw on the line of credit as needed up to a certain limit. You’ll make payments on an ongoing basis and only pay interest on the amount you borrow.
  • Business credit cards. A business credit card is another option for spreading payments over time. You can earn rewards on your purchases, but interest rates can be relatively high and you’ll likely have a lower credit limit than you would with a business loan or line of credit.
  • Business subsidies. In addition to borrowing money, it is also worth exploring opportunities for business grants. You might find funding from nonprofits, government agencies, or private corporations. Check resources such as Grants.gov or a local small business agency to find and apply for grant programs. Although grant applications can be competitive, they might be worth it if you earn money that you don’t need to pay back.

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