Types of Commercial Business Loans
Short Term Loans:
Lines of Credit
A line of credit is a type of loan that allows you to draw money as you need it up to your credit limit.
Payments are made and more money may be drawn based on the terms of the loan agreement. Lines of credit are designed to meet short term working capital needs, for example, boosting or expanding your inventory and helping you finance seasonal needs during peak business periods. A line of credit can also help cover operating expenses that can be paid back in the near term or to take advantage of prepaid supplier discounts. Meet working capital needs or bonding requirements without having to go through the application process each time with the help of a revolving line of credit. Frequent borrowers such as manufacturers, service companies and contractors use this loan. Collateral and repayment terms are established on an annual basis and tailored to your needs. Seasonal businesses generally use these loans to help smooth out cycles of cash flow needs. This line can also be used as overdraft protection for your commercial checking account so you reduce the worries of your daily cash flow needs. You can often access the money in your credit line by transferring funds via online banking services, initiating a telephone transfer to your checking account, or writing a check up to your available credit limit.
Accounts Receivable Loan
The checks are in the mail, but you need cash now. An accounts receivable loan allows you to pay monthly operating expenses while waiting for payments from customers. This type of loan is based on having credit worthy customers.
Long Term Loans:
Long term loans provide a set amount of capital for a particular need. These loans are funded all at once and then paid back over a specified length of time, generally 5 to 15 years. Term loans are secured with cash, inventory, equipment, securities, or real estate. Unsecured term loans are also available.
Equipment and Vehicle Loans
Purchase computers, heavy equipment, new or used cars, vans, trucks or other machinery. Repayment terms are dependent upon type and age of collateral.
Real Estate Loans
Financing is for purchase, refinance, or construction of office buildings, apartments, retail buildings, industrial buildings, medical/dental offices or warehouses. Options include owner-occupied or income-producing financing, interim, or permanent financing. Collateral is usually the property acquired or refinanced.
Help pay for construction costs, such as materials and labor, with an interim construction loan until your commercial, retail, or residential development project can be refinanced. Try to incorporate the purchase of the land as part of the construction loan, which can save you time and money. Real estate to be improved and building materials are used as collateral.
Land and Subdivision Development
This type of loan allows you to purchase a lot to build on or buy land to subdivide. Subdivision loans usually allow up to 18 months to subdivide, improve and begin selling. Lot loans usually allow up to five years.
Commercial Fishing Loan
Commercial fishing loans cover vessels and all types of fishing and processing gear or financing for the purchase of Individual Fishing Quotas (IFQs). Loans will be structured to fit the seasonal nature of the business.
Letters of Credit
Documentary and stand-by letters of credit are arrangements often used by import/export business, contractors and travel agencies to serve as assurance of payment. Documentary letters of credit are usually for less than six months. A stand-by letter of credit may be renewed annually. A letter of credit serves as a guarantee that the vendor you're working with will get paid. You apply to your bank or credit union for a letter of credit using cash, real estate or other business assets as collateral. Once you're approved, your lender will draw up an official letter of credit with a specific dollar amount guaranteed to a specific vendor. If you are unable to pay that vendor, your lender is obligated to do so, and will use your collateral to cover the amount.