Table of contents

- What is Commercial Financing?
- How Does Commercial Financing Work?
- What Are the Different Types of Commercial Financing?
- Choose the Best Commercial Financing Option With National Business Capital
What is Commercial Financing?
Commercial financing is an overarching term that describes the different loan options available to businesses through external lenders. You can use it for almost any business expenditure, but many business owners choose to use it for asset purchases, working capital, and large ventures, such as acquiring a competitor’s business. You can choose between various formats for your funding based on your needs. This may include financing options such as:- Term loans
- Business lines of credit
- Equipment loans
- Revenue-based financing
How Does Commercial Financing Work?
Commercial loans let businesses borrow capital from dedicated lenders and financial institutions. The type of loan you apply for can dictate how the money can be used, but most SBA loans, term loans, and lines of credit let you use the money for both major and minor business expenses. Once you accept the loan, lenders expect you to make regular payments on the loan until it’s paid off in full or you renew the loan with the lender. The payment amounts and repayment cadence will depend on the loan and the terms you agree to. Many of these loans require collateral as a condition of the loan, but not all. The type of collateral you’ll need to use depends on the loan, but may include the following:- Equipment
- Property
- Future revenue
- Personal assets
- Inventory
What Are the Different Types of Commercial Financing?
Businesses have diverse financing needs, which is why there are different commercial financing options that business owners can consider when looking for ways to grow their operations. Here are some of the most common commercial business loans you may want to consider:- Term loans: Term loans are business loans that give you access to money in a one-time lump sum payment. These loans are available in both fixed and variable interest rates and have few to no restrictions on how you can use the money.
- Business lines of credit: A business line of credit is revolving credit that business owners can draw on whenever they need capital, but they must manage regular payments to replenish the available credit. Once you pay the borrowed amount, you can draw that funding again, allowing you to have a continuous stream of capital for any situation.
- Revenue-based financing: This method of financing allows businesses to gain capital in an upfront lump sum in exchange for a percentage of their future revenue or sales. Revenue-based financing options are often easier to qualify for than traditional bank loans.
- Equipment financing: Equipment loans are a type of term loan designed to help you finance the purchase of equipment vital to your business’s operations and growth. Since the loan is secured by the equipment you’re financing, lenders may offer lower rates or qualify you for larger loans.
- Small Business Authority (SBA) loans: SBA loans are government-backed loans issued by lenders to qualifying small business owners. These loans are ideal for small businesses that lack the income or equity to qualify for traditional loans. However, these loans can have longer approval times, typically ranging from 3 to 6 months.
- Inventory financing: Inventory financing loans let you access capital to purchase additional inventory to hedge against increased demand. The inventory you purchase secures the loan, so lenders may offer lower rates on what you borrow.