Are you an American citizen and want to start a new business, but your pocket screams no? If you are too afraid to take a commercial loan, we assure you, you’re not the only scaredy cat. It’s completely fine to take precautions, thus, we bring you this post to ease your worries and tell you everything necessary about commercial loans like Maryland commercial loans.
What Are Commercial Loans?
Commercial loans are a type of loan or mortgage, lent either by a government bank or a private loan operator. The key reason for a commercial loan, as the name suggests, is to buy or rent a commercial property. Also known as business loans, they have multiple benefits, and you can seek a commercial moneylender for different financial purposes, like repairing your commercial real estate, extending existing property’s premises, purchasing new equipment or buying a new commercial property.
Note: There are many loan providers, from private to public in the market. So, check twice before moving further with your loan procedure.
When & Why To Use?
Commercial loans can be taken for multiple reasons, the following are the most common reasons:
- To start a new business
- To develop an existing property
- To buy a new commercial property
- To extend current real estate
- For residential projects and developments
- For commercial projects and developments
- To develop new real estate
- To buy commercial equipment
Types of commercial loans
Different commercial needs can be met with different types of commercial loans. We have mentioned below some most opted types of commercial loans.
- A business line of credit
- Equipment Financing
- Commercial construction loan
- Term loan
- Hard money loan
Also Read: 4 Foolproof Tips to Manage Home Loans Like a Professional
Advantages
Not only do commercial loans vary in use, but there are also significant benefits to opting for them. Mentioned below are the major benefits of commercial loans, so if you are worried about their security, you can rest assured and borrow your capital and grow your business.
1. Lower interest rates
Commercial loans are comparatively more accessible than other unsecured borrowings. They have a lower interest rate and you are given a chance to choose your preferred way of repayment. You can easily choose between fixed mortgage repayments and variable-rate mortgage repayments.
2. Huge capital gains
Commercial loans are not only beneficial due to their low-interest rates and easy accessibility; there are benefits like capital gains. You can be liable for a substantial capital gain while buying a commercial property due to a commercial loan. It’s a great way to realize capital growth over a long-term mortgage, as the prices of properties always rise.
3. Renting potentials
A commercial property loan doesn’t limit its uses to personal use. If you have space left in your commercial property, you can easily rent it out and monetize the surplus space. This way, you will earn a good additional amount, while growing your own business.
4. Long-term loans & Financial planning
One of the biggest advantages of commercial loans is, they are long-term loans. This means, unlike hard money loans, the tenure for commercial loans lasts longer than 10 years, and you would have plenty of time to plan your finances. You will be able to focus on more immediate requirements, like training staff, sales and monitoring overheads, than dread collecting huge capital for the smooth functioning of the business.
5. Variety of financial solutions
If you choose a professional and trustworthy commercial loan provider, you will be showered with other benefits, apart from general benefits. They will not only give you capital to buy or repair commercial real estate but also aid in invoice financing, bridging loans, asset refinance, etc.
Disadvantages
Commercial loans are no doubt a great option to grow your business and meet finance demands. However, there are also certain drawbacks to be kept in mind while opting for this financing option. Read below:
1. High deposits
Commercial loans have a lower interest rate than other borrowings; however, they also require a substantial deposit beforehand. You would need to raise a big amount of deposit, which is a tough task, especially when you are short on money, and this immediate cash can be used in other and better parts of your business.
2. Property maintenance
When you are granted the loan, all the payments like property maintenance, security and other expenditure becomes your responsibility. You can’t go back to the landlord and complain about leaking pipes or power shortages.
3. Need a high credit score
If you want to borrow a commercial loan, loan borrowers will demand a good credit score. They will not grant you a loan in case of poor record or demand collateral to proceed further with your loan approval.
So, is a commercial loan a good bet? Everything has its pros and cons; you weigh what’s on your side (pros or cons) and then make a decision.
