Commercial loans provide funding for companies to help them grow, improve and keep going when unexpected difficulties arise. If your own business requires funding, it may be that a commercial loan could be what you need.
How do commercial loans work?
Commercial loans are a form of finance made specifically to a business rather than an individual. You may have funded your business in the past from your own savings or from a personal loan, but commercial finance varies in a few ways, with key differences being the following:
Higher values
Lenders typically provide loans of a much higher value when lending to businesses rather than individuals. Some organisations may not require this higher amount, but larger companies in particular may benefit from choosing a commercial loan.
Varied options
Commercial loans vary a great deal when it comes to terms, rates and the amount borrowed. This is because businesses also vary, with no two companies being the same. A lender will look at your company’s size and potential for growth before offering a loan that is suitable.
Support
Additional support is often provided by lenders when they are supplying funds to a business. Banks are unlikely to show quite the same level of interest in an individual’s reasons for taking out a personal loan, but when it comes to businesses they are often keen to help companies reach their goals in whatever way they can.
Business use the funds provided by a commercial loan to ensure access to working capital. This is a necessity when it comes to hiring new employees, purchasing required inventory or ensuring growth in other ways.
When should you consider a commercial loan?
- If you need to establish business credit
It is important for a company to have its own credit accounts and to build up its own credit score. A business will find this harder if they always utilise personal savings or maintain all expenses within their general cash flow. This is not to say that working within one’s means is a bad thing, but it does mean that lenders are less familiar with a business’s ability to repay loans.
Taking out a commercial loan allows a business to prove itself, demonstrating that the company can borrow responsibly and pay back the loan in good time. This gives its overall credit score a boost and improves your chances of being accepted for loans with better rates in future.
If you incorporated your business
If you’ve already incorporated your business, you could be taking advantage of the protection this offers when it comes to your personal finances. Once incorporated, your company is considered a separate entity from you as an individual, which means it is the corporation and not you who is liable for corporate debt. Making use of a commercial loan instead of using your own funds for business growth can be advantageous because you are making it so that you are not liable and ensuring that your own individual assets are protected.If you need extra funding
If you need to increase your cash flow, perhaps to invest in something that is needed for business growth or simply to ensure that you can pay all company bills, a commercial loan can help. Sometimes businesses require access to extra funds because they would like to purchase modern equipment or hire new employees, which are things that can help to boost profits in the long-term. As long as credit is managed effectively and the funds have a clear purpose, taking out a commercial loan can be a very profitable investment for businesses.
If you intend to access finance for the purpose of purchasing property there are a number of bridging loan companies such as Glenhawk that can provide fast and flexible loans.