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.  Here we take a look at how you can evaluate whether the debt will affect your investment.
    Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  3. Investing

    Why do companies issue debt and bonds? Can't they just borrow from the bank?

    Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank as more restrictive and expensive than selling debt on the open market ...
  4. Entrepreneurship

    Mezzanine Financing

    Learn about this alternative method of financing companies use to finance expansion.
  5. Personal Finance

    Promissory Notes: Not Your Average IOU

    These may be a handy way to borrow money, but this convenience does not come without risk.
  6. Investing

    What would happen to a company's external fund requirements if it reduces the payout ratio, or if it ...

    In short, the stronger the company's internal cash flow, and in turn cash position, the less the need to draw on an external fund. If internal cash flow or the retention ratio increases, external ...
  7. Investing

    What is the difference between investment banks and merchant banks?

    Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different services. In practice, the fine lines that separate the functions ...
  8. Investing

    What is the difference between asset-based lending and asset financing?

    In the most common usage, the terms "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending generally refers to a business using its assets as collateral for ...

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center