Commercial Loans
A commercial loan is where money is lent from a financial institution or private lender (such as BRRR Loans) to a business, usually for a predetermined use. They can be taken out for a wide variety of reasons, including business start-ups, the purchase of commercial property, and funding capital expenditures.
There are two types of commercial loans: secured and unsecured. The latter is based purely on creditworthiness.
These are most usually offered by banks and have rigid regulations as to who is and isn’t eligible. They also require definitive proof of turnover and profit, with the need to submit tax returns and other verification.
A secured loan—also known as a hard money loan—requires collateral. This might be in the form of existing business property or equipment, through a mortgage-like arrangement, liquid funds, or another kind of equity.
Commercial loans can be short, mid, or long-term, depending on the type taken out and what the money is to be used for.
How Commercial Loans Work
Commercial loans are tailored toward individual business needs. If it’s for the purchase of a property, for example, then this is likely to extend over a longer term. A shorter-term loan might be to finance inventory or perhaps to pay extra staff taken on for seasonal needs.
While it’s common to use physical assets as collateral, we can sometimes use company accounts and liquid assets in the same way. BRRR Loans range of commercial lending is always backed with crystal clear terms and conditions. This makes it simple for your business to easily budget for the whole term of the repayment.
What are the Different Types of Commercial Loans?
There are many different types of commercial or business loans. Some of the most common examples are:
- A hard money loan: AKA a loan secured on a particular asset and (usually) lent over a short timescale. Typically lasting anything from a couple of months to two years, these are ideal when you need money fast and know you’ll be able to pay it back quickly.
- Real estate loan: For the purchase of a new business property. Such a loan can last anything from five to 20+ years.
- Business line of credit: This provides a lump sum of credit that you can access when you need it. You only pay interest on the funds that you use.
- Construction/renovation loan: As the name suggests, this is money that you borrow for either a new build commercial property or to upscale an existing one.
- SBA loans: These are loans that are backed by the Small Business Administration to smaller, for-profit US entities. The money can be used on whatever you choose.
The Advantages of a Commercial Loan
BRRR commercial loans are the ideal solution to advance a business blueprint, purchase or improve a commercial property, or to take your business idea from the planning stage into the real world. Advantages include:
- No need to give away a percentage of your business to investors: A commercial loan removes the need to relinquish ownership in return for investment.
- You’ll get the money straight away: Once approved, the money will be immediately available to use.
- The interest is tax-deductible: When you complete your year-end tax return, the interest paid on the commercial loan is a legitimate deductible expense.
- Easy money management: The repayments can be structured to be manageable and predictable over the complete term of the loan.