Did you know that small businesses generate 44% of U.S. economic activity? Commercial loans are a vital part of the business financing landscape. But what exactly are they? This article will explain everything you need to know about commercial loans, from what they are to how automation can take your lending process to the next level.
Table of Contents
What Are Commercial Loans?
A commercial loan is a funding arrangement that is debt-based between a financial institution such as a bank and a business. Retail loan proceeds can be used for various purposes, including financing the purchase of commercial real estate, equipment, vehicles or working capital.
Commercial loans are typically made through commercial loan lending divisions of large banks. However, many non-bank commercial lenders, such as the Small Business Administration (SBA), provide commercial loans as well.
The terms of commercial loans vary depending on the loan’s purpose, the borrower’s size and creditworthiness, and the lenders’ policies and procedures. However, most commercial loans have reasonably similar terms, such as fixed or variable interest rates and repayment periods of five to 25 years.
How Commercial Loans Work
When a small business takes out a commercial loan, they’re borrowing money from a lender for business purposes. The loan may be secured by collateral, which is property or assets the lender can take if the business doesn’t repay the loan.
The loan may also be unsecured, which means that collateral isn’t required, but the business will likely pay a higher interest rate. Repayment terms are usually shorter than other loans, and the company may have to make payments more frequently.
Commercial loans can be used for various purposes, such as expanding a business, buying equipment or real estate, or consolidating debt.
The Commercial Loan Process
When a business applies for a commercial loan, the lender will evaluate many factors, including the business’s credit history, financial statements, and industry. The lender will also review the purpose of the loan and the proposed use of the funds.
If the business is seeking a secured loan, the lender will also evaluate the collateral to be used as security for the loan.
Once the lender has all of the necessary information, they will decide whether to approve the loan and what terms to offer.
Types of Commercial Loans
There are many types of commercial loans available, each with its terms, conditions, and purposes.
Subscribe to BeSmartee 's Digital Mortgage Blog to receive:
- Mortgage Industry Insights
- Security & Compliance Updates
- Q&A's Featuring Mortgage & Technology Experts
Some common types of commercial loans include:
- SBA loans: SBA loans are government-backed loans available to small businesses. These loans can be used for various purposes, including working capital, equipment or real estate.
- Equipment financing: Equipment financing is a type of loan used to finance the purchase of new or used equipment. Then the equipment serves as collateral for the loan, and repayment terms are usually based on the useful life of the equipment.
- Real estate loans: Real Estate loans are used to finance the purchase or renovation of commercial real estate. These loans typically have longer repayment terms than other types of commercial loans.
- Lines of credit: A line of credit is a type of loan that allows a business to borrow money up to a specific limit. The business can then draw on the loan as needed and make payments as they are able.
- Invoice financing: Invoice financing is a type of loan that allows businesses to borrow money against unpaid invoices. The loan is typically repaid when the customer pays the invoices.
- Merchant cash advances: A merchant cash advance is a loan based on future credit card sales. The loan is typically repaid with a percentage of future credit card sales.
Commercial loans can be an excellent way for businesses to finance their operations. Through the right commercial loan, businesses can grow and expand their operations.
How Automation Helps Lenders in the Commercial Loan Process
The commercial loan process can be time-consuming and complex. Many steps must be completed from the initial application to the final approval.
Automation can help lenders in several ways, including:
- Streamlining the application process: Automation can streamline the commercial loan application process by automating repetitive tasks, such as data entry and document collection.
- Reducing paperwork: Automation can also reduce the amount of paperwork that is required for commercial loans. By digitizing documents and automating tasks, lenders can save time and money.
- Improving communication: Automation can improve communication between lenders and borrowers by providing a single platform for all communications. This can help to reduce confusion and miscommunication.
- Speeding up the loan process: Automation can also help speed up the commercial loan process by automating tasks and reducing the need for manual processing.
Automation is a valuable tool for lenders in the commercial loan process. By streamlining the application process, reducing paperwork, and improving communication, automation can help to save time and money.
When it comes to commercial loans, automation is the key to success.
How FlashSpread Helps Lenders
FlashSpread is a cloud-based software solution that automates the spreading process by converting PDF tax returns into financial reports. With FlashSpread, users can get instant results for faster decision-making. Additionally, FlashSpread can help identify better deals, increase productivity, and allow more time to assist clients.
With FlashSpread, lenders can:
- Automate repetitive tasks: FlashSpread automates repetitive tasks, such as data entry and document collection. This saves time and reduces errors.
- Reduce paperwork: By digitizing documents and automating tasks, FlashSpread reduces the amount of paperwork required for commercial loans.
- Improve communication: FlashSpread provides a single platform for all communications, which helps to reduce confusion and miscommunication.
- Speeding up the loan process: By automating tasks and reducing the need for manual processing, FlashSpread can help speed up the commercial loan process.
By automating tasks and processes, FlashSpread can help lenders get loans approved faster. So if you’re looking for a way to save time and money in the commercial loan process, FlashSpread is the answer.
To learn more about how FlashSpread can help you streamline the commercial loan process, visit our website or contact us today.
