Commercial Real Estate Loans
Loans for commercial real estate are different than loans for personal real estate. To qualify for a commercial loan, the property being purchased must be an income-producing property. Whether this is to purchase a building for your own business, or an investment of a building to lease out to others, the real estate could qualify for a commercial loan. Construction and/or development of a property may also qualify for commercial lending.
Similar to a private real estate loan, a commercial real estate loan is a mortgage, and a lien is placed on the deed of the property to secure the loan. But, the rates may differ, as may the life of the business loan. So will the qualifications.
Another alternative is investment financing. If purchasing with the intent of the property becoming an income property such as an office building or apartment complex with rentals or leases, investment financing should be discussed as a possibility.
When looking to build some type of production facility such as a small factory, permanent financing is a long-term option available once construction is completed. This may be offered in order to pay off a short-term construction loan.
Lines of Credit
A line of credit, or LOC, allows you to receive funds up to a specified amount. Say you have a $20,000 LOC. You may draw $5,000, $10,000, $20,000, or another specific amount at any given time for unexpected cash needs. You will pay interest only on the amount you access.
Lines of credit are very useful for a business to maintain and vary in potential draw time periods. A LOC allows you immediate access to funds if you face unexpected repairs, or if you're offered a special deal on inventory you want to purchase for resale. You'll know ahead of time how much you have qualified for. Depending upon your situation, a LOC may or may not require some form of collateral.
Equipment Financing and Term Loans
As the name implies, these types of business loans helps launch your business forward by allowing you to purchase important equipment and assets. For the farmer or rancher, this may be a tractor. For a warehouse operator, this could be a forklift. For an insurance agency, this may be computers. Whatever your business may need, equipment financing and term loans are available.
This could be for the expected life of the equipment, or a shorter period of time, depending upon your preference and qualifications. Interest rates will vary depending upon what the business loan is to be used for and your qualifications.
Letter of Credit
A letter of credit offers a buyer or seller protection. For the buyer, it's a bank document that backs up your purchase. So, if you are buying a product, and the seller doesn't deliver, the bank will see you get your funds back.
For the seller, it works in reverse. If you never get paid for something you shipped out to someone else, it offers security to get you paid.
Letters of credit can also be obtained for construction. A letter of credit works as a construction contract that the job will be finished by the contracted time and to the specifications of the job. It is a letter written by the bank on behalf of the construction company to the beneficiary. This commercial lending option most often offered when construction is for government- or utility-related work. The project specifications must be included in the letter.