Companies can borrow under a number of different types of Commercial lending arrangements that vary in types and in duration. Some are more beneficial than others and provide unique advantages to borrowers. This article will explore the different types of Commercial lending instruments that are currently available.
A term loan is sa type of Commercial lending instrument that many individuals are familiar with. These work similar to a mortgage loan. A predetermined amount is lent out, with a set or variable interest rate, and regular monthly payments are made on this term loan. The term loan in effect is just a loan that is repaid over time just like any other loan.
A line of credit is another type of Commercial lending instrument where a company gets access to a total amount that they can borrow althouth the entire amount is not borrowed all at once. When a portion is borrowed, interest is charged. This provides a borrower with access to instant credit to cover their financial needs. This allows a business the ability to expand and grow without having to request additional funds from their lender which may slow down the borrowing process and limit their ability to realize the financial options available.
Mortgages are also available to commercial borrowers which are used for property purchases. These emulate individual mortgages in most aspects.
Commercial loans often have loan covenants on them and require reviewed or audited financial statements. These covenants ilrequire certain financial ratios to be met or the loan may default and become callable by the lender for violating their covenants. More info: Commercial lending collin county