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Loan Type
Business Loan
Monthly Revenue
$20K-$30K
Time In Business
2 or more years
Credit Score
Good (690-719)
1
Fast Turnaround
9.5
ExceptionalBestMoneyscore
Popularity
Based on visits in the past 7 days
10.0
Brand Reputation
Based on web trends
9.3
Biz2Credit
Loan Amount: $50K-$2M
Apply online in minutes
Time In Business: 12+ months
Monthly Revenue: $10K+
Minimum Credit Score: 650
507 businessesvisited this site today
15,381Reviews
2
9.4
ExcellentBestMoneyscore
Popularity
Based on visits in the past 7 days
9.0
Brand Reputation
Based on web trends
10.0
SoFi Business Loans Marketplace
Loan Amount: $5K-$2M
Time in Business: 12+ months
Monthly Revenue: $10K+
Minimum Credit Score: 680
9,803Reviews
3
8.9
GreatBestMoneyscore
Popularity
Based on visits in the past 7 days
8.7
Brand Reputation
Based on web trends
9.3
OnDeck
Loan Amount: $5K-$250K
Time In Business: 1+ years
Monthly Revenue: $8.5K+
Minimum Credit Score: 625
4,811Reviews
4
8.8
GreatBestMoneyscore
Popularity
Based on visits in the past 7 days
8.4
Brand Reputation
Based on web trends
9.6
Lendio
Loan Amount: $5K-$2M
Time In Business: 1+ years
Monthly Revenue: $12K+
Minimum Credit Score: 580
21,562Reviews
5
8.9
GreatBestMoneyscore
Popularity
Based on visits in the past 7 days
8.6
Brand Reputation
Based on web trends
9.4
Fundera
Loan Amount: $5K-$5M
Time In Business: 1+ years
Monthly Revenue: $10K+
Minimum Credit Score: 580
999Reviews
6
9.2
ExcellentBestMoneyscore
Popularity
Based on visits in the past 7 days
8.8
Brand Reputation
Based on web trends
9.8
LendingTree
Loan Amount: $5K-$1M
Time In Business: 1+ years
Monthly Revenue: $8K+
Minimum Credit Score: 500
15,239Reviews
17,605 visitors
connected with a lender in the past week
BestMoney Total Score
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9.5
BestMoneyscore
Popularity
Based on visits in the past 7 days
10.0
Brand Reputation
Based on web trends
9.3
Biz2Credit
Loan Amount: $50K-$2M
Apply online in minutes
Time In Business: 12+ months
Monthly Revenue: $10K+
Minimum Credit Score: 650
507 businessesvisited this site today
What is a commercial loan?
Unlike traditional consumer loans, commercial loans are used to buy additional assets or properties to grow a business. Generally the lender lends a borrower capital specifically to assist with business expenses such as equipment, new real estate, materials or labor costs. These loans are typically short-term loans but can be renewed to extend the life of the loan if ongoing capital is needed by the business. Commercial loans are a great option for small business owners looking to grow while retaining all the company equity.
How does it work?
Conventional commercial business loans work differently than a personal loan. First, you may want to be sure that your business is structured as an LCC, S, C or LC corporation. This allows the business to assume financial responsibility. This protects a single person from bearing all the financial weight and risking personal stake in the event of bankruptcy or default. Next you will choose your lender.
Commercial lenders are going to want to ensure you have strong financials as well as the ability to repay the loan in a timely manner. This is done by assessing your net operating income (NOI), your debts, as well as your business credit score. Your business credit score is distributed through FICO, the same as your personal credit score. Be aware, your business’ finances as well as your personal financials will play a part in your business FICO score (FICO SBSS). It is wise for any small business owner to take care of both business and personal finances to mitigate the risk of not achieving a high FICO score.
Types of commercial loans
Similar to personal loans, commercial business loans also come in a variety of options. The type of loan that best fits will depend on the time restraint you’re under, your financials and the type of investment you’re looking to make. Here are some of the most widely used commercial loans:
- SBA 504 Loans - Loans that are financed 50% through a bank, 40% through a certified development company and the remaining 10% put up by the borrower. There is a slow funding process but historically these loans yield below market interest rates.
- Long Term Fixed Interest Loans - When a business is looking to expand or make an investment, generally a long term business loan is used. There is usually a static interest rate starting at 4% ranging up to 7%, and includes a short loan term rarely exceeding 20 years.
- Interest Only Payment Loans - Typically used for businesses who anticipate receiving a large payout in the near future. With this loan type they will pay interest only during the loan terms and a full principal payout at the end of the loan.
- Refinance loans - Businesses looking to take advantage of a lower commercial loans rate and monthly payments may opt for a refinance loan. These may include additional fees but tend to save the business on interest charges over the life of the loan.
- Construction Loans- Businesses needing to cover material costs during an upgrade or construction repair often seek out construction loans.
- Blanket Loans - A business owner having multiple properties might look into a blanket loan to consolidate the costs of all the properties. This allows owners to cover multiple business and stave costs when or if they decide to sell one of the properties.
- Hard Money Loan - Alternatively there are hard money loans in which a lender will provide a short term, high commercial loan rate. Rates can range up to 15% but are usually easy to qualify for and can be granted quickly. Their loans are usually reserved for investors who otherwise would not have been able to invest otherwise.
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FAQs
Who can qualify for a commercial loan? - Since the last major recession, lenders have become much more stringent on who they allow to receive commercial loans. Commercial lenders want to be protected at all costs in the event of default. That being said, any business owner can qualify for a commercial loan. Commercial loan pricing depends on your property value, your cash flow and your personal finances as well.
What is the average loan term I can finance with a commercial loan? - The typical loan term ranges from 5-20 years.
What is the average interest rate for a commercial loan? - While some commercial lenders offer as low as 4% interest for their commercial loans, it is ultimately based upon your financial strength. This includes your personal credit, the business credit and your property value to name a few.
Can you purchase investment property with a commercial loan? - Yes, commercial loans can be used to obtain an investment property. However, commercial loans are solely for income producing properties, non residential.
How long does it take to get a conventional commercial loan? - A conventional commercial loan ranges from 30-45 days.
What types of commercial real estate can I purchase with a commercial loan? - Any income producing property such as an apartment building, office building, retail building, medical facility, warehouses, hotel, resort, or land development.
How to apply for a commercial loan
Applying for a commercial business loan is a stringent process and requires a good amount of paperwork up front to get the ball rolling. Here are a few documents you will need when completing the application process.
- Tax Returns (Up to the last 5 years)
- Your finance documents including your income statement, balance sheet and any off the books assets the company may possess.
- Business Plans detailing how you plan to use the property
- Property appraisal
- State certification as a corporation or limited liability entity
Once you’ve gathered all the necessary information you’ll need to choose your lender. Your lender will be based largely on the type of loan you’ve chosen. Lenders such as banks and commercial lenders will require a different process than SBA or hard money lenders.
The main points commercial lenders will look for is the type of property being financed, strong business financials and strong personal financials. Small business loans come with a substantial amount of risk and lenders want to know they are covered. Showing you, as the borrower, can handle your own money and that of your business well can give the lender peace of mind and potentially make it easier for you to qualify for a loan.
Disclaimers
Biz2Credit:
Applies to the Biz2Credit Term Loan. Not reflective of rates for all products. Full Terms & Conditions available at biz2credit.com.
*See website for average amounts by product.