Commercial Loan

AAA

DEFINITION of 'Commercial Loan'

A debt-based funding arrangement that a business can set up with a financial institution. The proceeds of commercial loans may be used to fund large capital expenditures and/or operations that a business may otherwise be unable to afford.

INVESTOPEDIA EXPLAINS 'Commercial Loan'

Due to expensive upfront costs and regulation related hurdles, smaller businesses do not typically have direct access to the debt and equity markets for financing purposes. Therefore, they must rely on financial institutions to meet their financing needs.

Similar to consumer credit, businesses have a variety of lending products to choose from. A line of credit, term loans and unsecured loans are just a few examples. However, small businesses should shop around at different institutions to determine which lender offers the best terms for the loan.

RELATED TERMS
  1. Equity Financing

    The act of raising money for company activities by selling common ...
  2. Commercial Investment

    An investment in a for-profit enterprise involved in the buying ...
  3. Unitary Thrift

    A company that controls a single savings-and-loan association. ...
  4. Consumer Credit

    A debt that someone incurs for the purpose of purchasing a good ...
  5. Debt Financing

    When a firm raises money for working capital or capital expenditures ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
Related Articles
  1. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  2. Different Needs, Different Loans
    Options & Futures

    Different Needs, Different Loans

  3. Why do companies issue debt and bonds? ...
    Investing

    Why do companies issue debt and bonds? ...

  4. Promissory Notes: Not Your Average IOU
    Personal Finance

    Promissory Notes: Not Your Average IOU

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center