Commercial Business Loans: Are They the Best Option for You?

A commercial business loan is completely different from a personal loan. For one thing, there are many more options for how to get funding, which is good news for business owners. Loans of different types all reflect various versions of a business loan. Some might be unsecured whereas others use unpaid recent invoices as a form of collateral to ease cash flow constraints.

Let’s now run through a few of the types of commercial business loans to see which one is the best option for your business.

Startup Loan

A startup loan is intended only for startups that are limited on funds and looking for a lender to provide some initial capital. It only applies usually to new startups rather than ones that have been around several years, so only a small percentage of businesses qualify.

Commercial Business Loan

A commercial business loan is another way to fund the next phase in a business’s development. This type of loan is only available to certain types of businesses that qualify for them.

The main advantage of this type of more traditional commercial lending is that it tends to be more affordable than other options. The repayment terms are quite specific though.

Asset-based Loan

An asset-based loan uses the value of qualifying unpaid invoices as a value determinant. The lender offers a line of credit based on the value of invoices that meet their criteria. The line of credit then facilitates faster cash flow for your company than waiting 30-60 days to get paid for outstanding invoices.

This type of business loan is useful when growing quickly. When this happens, costs grow rapidly with a larger premise, new staff, and equipment while larger invoices don’t get paid any faster! This quickly creates a cash crunch where a company grows faster than it can manage. An asset-based loan, therefore, eases the cash flow problem, so your company can continue expanding.

It’s possible to apply for business loans from Lending Express with an asset-based loan as one option. As a broker, they can find lenders that support companies with valuable invoices.

Merchant Cash Advance

A merchant cash advance works in a different way to an asset-based loan. Instead of using invoices, here credit card billables can add up to a sizable sum and these can be used for the purposes of a cash advance.

A cash advance relating to credit card billables is then repaid once the credit card payments are received from your customers. This works well for a company that is dealing more often with credit cards vs mailing out a paper invoice to large businesses.

Vehicle or Equipment Financing

Sometimes your business needs to purchase important vehicles or specialized equipment that they require to operate. When funds aren’t available for them, this creates a major obstacle. Some lenders offer financing for companies to go ahead and purchase the equipment or vehicles they require. These types of loans are usually secured against the new assets.

The right type of commercial business loan depends on a) what your company qualifies for, and b) how much money is required. By determining these two facets, it helps narrow down the options for business funding to a few choices to pick between each with their own pros and cons.