Anyone can need money at any stage of life, and when you run or plan to run a business, whether at a large scale or small scale; you will surely be requiring a lot of money. When you see around yourself for financing your business, you may not find many options but commercial loans. A commercial mortgage is probably the only solution from where you can fulfill your requirements and get the desired capital in the form of a loan.
People in business, more often, need capital to support their business and expand at times. Fortunately, there are different options available to the businessmen for commercial loans. Some of the options were not suitable earlier, but more and more people are adopting these options to secure their business loans.
According to a survey by the Federal Reserve Survey, 40% of business owners applied for commercial loans in the USA alone in a year. The ratio of loan applications was 5% less than the previous year. The limited number of loan applications might have been the reason for the higher success ratio of loan approvals that year.
The slight decline in loan applications does not mean a reduction in the loan amount. As per a survey conducted by the Small Business Administration, only small business owners borrow $600 billion every year. It shows that there are fair chances for the businessmen to get their loans approved if they apply with proper and complete documentation.
It is also pertinent to note that selecting the right option for commercial loans is crucial. You may be doing business with growth potential and looking to expand it and seeking a commercial loan but don’t know the right category to apply for the loan. Your chances of loan approval are quite low. Therefore, it is necessary to have sufficient information about the available commercial loan options before applying. We are discussing here the seven best options to seek business loans that would guide you to your successful loan approval.
Traditional Terms Loan
Tradition Terms Loan is one of the standards and best-known options. Most of the people know about it due to its popularity and take it as the only commercial loan option which you can opt for multiple financing needs for your business. This option is straightforward and also available in long and medium terms. You get the loan of a specific amount for your business from a financial institution and agree to pay back in 10, 15, 20, or even in some cases up to 25 years. The payback amount includes the interest and the more prolonged the term period you choose, the higher the amount you return to the lender. If you have specific and clear targets to meet, you can also go for medium terms from 2 to 5 years.
Here comes the fast-track solution of getting loans whenever you require quick cash for financing small needs in the business. As it is self-explanatory from the name, it is a short-term loan granted for 3 to 18 months. The lenders like it the most as they give speedy approval on short-term loans due to its quick recovery. This loan is most suitable when you need a small capital for some quick fixing in the business without much risk.
As the name suggests, this loan is for buying the equipment you require for the business. This option is most suitable for the manufacturing industries and expensive equipment necessary for technology advancement and smooth operations. As soon as your equipment loan is approved, you can start using the machinery and pay in monthly installments. The subject equipment itself becomes the collateral in this loan, and no other guarantee is required.
Commercial Real Estate Loan
This loan is a granted for a more extended period like 20 to 25 years or even more in some cases. This loan is usually required by the big enterprises which want to expand physically in terms of office space, warehouse, manufacturing facility, etc. The commercial real estate is indeed quite expensive, and most of the businesses opt for lending the huge capital for buying that real estate, which also serves itself as collateral.
Small Business Administration (SBA) Loan
What when your business does not have the complete qualification for the traditional loans approval? Here comes the Small Business Administration (SBA) to rescue the small companies and guarantees the lenders that most of their loan will return even if the business goes default. That’s why it’s known as SBA Loan even SBA is not directly lending the money. These loans are also granted from medium to long terms and take time for approvals like a traditional loan. These loans are suitable for comparatively new and small businesses in a crucial need of money. According to the latest study by Small Business Administration, 17% SBA Loans were granted to the startups.
Business Lines of Credit
It is also one of the best options when you have multiple business targets for funds, and you are not sure about the exact capital required and timelines. In Business Lines of Credit, the lender approves a pool of money for your business which is available with the lender in your name. You may withdraw a partial amount required from that pool and payback with interest only on the amount you borrowed, and the domain again tops up with the original amount approved for you.
Merchant Cash Advances
This loan is probably the most expensive option available due to its high-interest rate and management cost at the end of the lender. In Merchant Cash Advances, you may get a lump sum loan and allow the lender to take a certain percentage of cut from your daily sales. This loan option is not recommended in most of the cases as you may fall short of cash flow in everyday transactions.
After reviewing the seven best options, you should be able to figure out how to apply for a commercial loan. Nonetheless, the expert advice is always the best option, and in need of, you may connect for any suggestion, loan cases, and their quick approvals.