Editor's choice: First Down Funding business loans
- No prepayment penalties
- Competitive rates
- Works with bad credit and most industries
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Commercial loans are meant to help you business grow. No matter what you’re looking to finance — from real estate to equipment — a commercial loan may benefit your business. There are a number of lenders out there, so determine the type of loan you need and compare loan offers with a critical eye.
Commercial loans are taken out by an individual, partnership and other groups on behalf of a business or company. They are used to fund commercial activities that can help grow and develop a business, though most are usually taken out for real estate purchases.
Because the loan amount is intended for growing the business, a lender will consider your business financials when deciding whether to approve the loan. Loan amounts vary based on your business and what you need to fund, but repayment options are flexible to support fluctuations in cash flow.
In addition to going through a traditional bank, you can apply online for a commercial loan.
As an alternative to commercial loans, business credit cards can help fund ongoing and one-off purchases.
When taking on a commercial loan, consider that any defaults or late payments could be listed on your business’s credit report, seriously affecting the future borrowing power of your business. Avoid applying for a loan that your business won’t be able to pay back and have a solid financial plan of how you’ll incorporate the added expense of loan repayments into your business budget.
If you’re looking to invest in a commercial property, you’ll generally look at real estate designed for use as an office, retail or industrial space. Unlike residential property, which has relatively low risks but offers lower returns, commercial property has the chance of a bigger return on investment — but at a higher risk.
Buying commercial property is also more expensive, and maintaining or upgrading it can potentially cost you tens of thousands of dollars. In addition, commercial properties typically experience higher vacancy rates, representing a higher risk over residential properties. Because of this, you may face a higher interest rate when you look to buy property with a commercial loan.
And unlike residential mortgages, commercial property loans last for 5 to 20 years. This is often accompanied by balloon payments, meaning you make small monthly payments for a set number of years before paying off the principal in one lump sum.
Purchasing a residential property is a more familiar process, so it’s useful to know the key differences you’ll encounter when purchasing commercial real estate.
While every situation is different, you can smooth the process of purchasing commercial properties with a few general tips:
Investing in commercial real estate has several benefits, but it involves a significant investment of time and money. Here are the types of loans available if you’re looking for financing.
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This CDFI is the only community bank in the DC area that focuses on developing its surrounding community.
You could get a no-cost loan — or pay more than you would have with another lender.
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