Commercial Loan

What is a 'Commercial Loan'

A commercial loan is 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.

BREAKING DOWN '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. Commercial Real Estate Loan

    definition of a commercial real estate loan
  2. Commercial and Industrial (C&I) ...

    Any type of loan made to a business or corporation and not to ...
  3. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  4. Tenured Capital

    Loans offered by the government to key business sectors.
  5. Loan Commitment

    A loan amount that may be drawn down, or is due to be contractually ...
  6. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
Related Articles
  1. Credit & Loans

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  2. Entrepreneurship

    Steps to Qualify For a Small Business Loan

    Learn steps to qualify for a small business loan such as identifying financing needs, preparing a business plan and getting required documents.
  3. Credit & Loans

    Getting Government Loans For Your Small Business

    Would a government loan provide a more cost-effective way to finance your business? See whether your company qualifies for a government loan.
  4. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  5. Economics

    The Reality of Commercial Real Estate Loans

    It’s corporations and partnerships that most commonly take out commercial real estate loans.
  6. Entrepreneurship

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  7. Credit & Loans

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  8. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  9. Personal Finance

    Tips To Improve Chances Of A Small Business Loan

    Enhance your small business loan eligibility by keeping these important tips in mind.
  10. Credit & Loans

    Explaining Leveraged Loans

    Leveraged loans are loans extended to companies or people who already have large amounts of debt.
RELATED FAQS
  1. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  2. How do commercial banks make money?

    Learn the different ways commercial banks make money, including interest from loan products and banking fees charged to customers. Read Answer >>
  3. What are the typical repayment terms for a syndicated loan?

    Learn more about syndicated loans and how they are structured, specifically including the typical repayment terms for a syndicated ... Read Answer >>
  4. I am considering taking a loan from my qualified retirement plan. What is the definition ...

    For the purposes of a qualified plan loan, the reasonable rate of interest that the Department of Labor provides is one consistent ... Read Answer >>
  5. What are some examples of debts that I can consolidate?

    Read about different kinds of debts than can be combined into a consolidation loan, including unsecured debts, secured debts ... Read Answer >>
  6. What are the typical requirements to qualify for closed end credit?

    Learn what closed-end credit is, and the various requirements that borrowers must meet in order to obtain a closed-end credit ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center