How Small Businesses Benefit From Commercial Lending

 

En route to launching your startup, you may have already had a few dealings with lenders. There are dozens of sources that business owners can borrow from, some better and some worse. When it comes to financing your small business, there are certain benefits that come from commercial lending that aren’t available through regular bank loans. If you have the credit and the collateral, you might be able to get secure funding with terms that can really set your company up to thrive.

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In some instances, having to repay a loan quickly doesn’t sound particularly helpful. When your business just needs a quick rush of cash, however, loans with shorter terms can actually benefit you. Say, for example, you own a commercial building that needs a minimal amount of work done before it will be ready for tenants. The lender knows what you plan to use the money for and, in theory, how long it will take you to pay it back. Armed with this knowledge, that lender is more likely to expedite your advance instead of making you wait through a long processing period.

Depending on your situation and that of the lender, it’s possible to have these terms extended if there’s a hiccup in repayment. Commercial lending is often done with small businesses in mind; the terms should work to your advantage instead of causing any sort of financial strife. Nonetheless, It’s important that business owners have a straightforward plan for creating the revenue needed to repay the loan. Since many commercial loans require collateral, any indecisiveness in spending and reimbursement can cost your business more than money.

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Some business loans can have very high interest rates. If the lender has reason to consider your company a risky investment, your financing will likely come with a substantial APR. However, when your company is in a position to put forth an asset to secure the funding, the lender has less of a reason to attach a high interest rate. Every loan has inherent risk, for both the borrower and the lending company, but using the appropriate asset in the right situation can mitigate that risk and help you secure a loan with better-than-average terms.

Small businesses need a little monetary help when first getting off the ground. Commercial lending isn’t the only way for a young company to get money, but it might be the best way to get the funding within in a reasonable time frame and without unreasonable terms.