Commercial Loans FAQs

A commercial loan refers to any form of debt financing extended to a business, encompassing various repayment structures. These loans are essential for funding diverse aspects of small businesses. What were once viewed as unconventional options are now commonly preferred by business owners seeking reliable commercial financing solutions.

Commercial loan costs can vary significantly based on the type of funding you choose. For options that involve interest calculations like short-term loans, business term loans, SBA loans, equipment financing, and business lines of credit, you’ll repay a combination of interest and principal in regular installments, typically weekly or monthly.

Alternatively, some commercial lending products utilize factor rates to determine fees. With these agreements, the total repayment amount is fixed from the outset, regardless of whether you pay off the loan early or on schedule.

Estimate your total cost of borrowing using our commercial loan calculator.

The functionality of commercial loans varies based on the type chosen. Here’s an overview of common commercial financing options and their characteristics:

Short-term commercial loans

Short-term commercial loans provide small businesses with a lump sum of working capital repayable within 3 to 18 months. They are valued for their accessibility and rapid approval.

These loans enable same-day funding for expenses like renovations or inventory.

Key features:

• Funding amount: Up to $500,000
• Interest rate: Starting at 10%
• Term: 3-18 months
• Funding speed: Same day availability possible
• Obtaining short-term commercial loans online is generally simpler compared to traditional bank financing.

Do you qualify?

• 
  Time in business
  1+ years
• 
  Annual revenue
  $75K+
• 
  Credit score
  540+

Is a short-term commercial loan right for you?

If you’re facing unexpected expenses and require immediate capital, short-term loans could be the solution for you. Shorter terms and lower loan amounts, lead to higher acceptance rates and faster approvals.

Consider a short-term loan if:

• You need funding for a short-term project or immediate expense.
• Your bad credit history prevents you from qualifying for long-term commercial loans.
• You require swift funding and a quick turnaround.

Business term loan

Business term loans provide commercial companies with a lump sum that is repaid over a period of 1 to 5 years. They are ideal for financing substantial projects such as equipment purchases and commercial real estate.

Qualified applicants can secure competitive interest rates starting at 7%, which are comparable to the best rates offered by commercial banks.

Unlike traditional banks that can take months to process applications, iBusinessLender can present you with options in as little as one business day.

Key features:

• Funding amount: Up to $250,000
• Interest rate: Starting at 7%
• Loan term: 1-5 years
• Funding speed: As fast as 1 day

Qualification requirements:

Due to the larger loan amounts and longer terms involved in long-term commercial financing, there’s typically a stricter eligibility criteria. Applicants with lower credit scores or revenues may need to explore alternative commercial loan options.

Do you qualify?

• 
  Time in business
  1+ years
• 
  Annual revenue
  $200K+
• 
  Credit score
  600+

Is a term loan right for you?

If you’re preparing for a significant new business project that requires substantial investment, term loans could be the ideal choice. While they typically have stricter qualification requirements, their longer, predictable repayment schedules and lower interest rates make them well-suited for qualified borrowers.

Consider a term loan if:

• You’re planning to purchase costly equipment or real estate.
• You prefer a longer repayment period for your commercial loan.

SBA loans

SBA loans are backed in part by the Small Business Administration (SBA), which reduces risk and expands access to financing opportunities for more businesses.

These loans typically offer some of the most favorable commercial loan rates and terms available. However, due to the government involvement, the process can be time-consuming, with funding often taking 3 to 4 weeks after approval.

Key features:

• Funding amount: Up to $5 million
• Interest rate: Starting at 6.25%
• Loan term: 5-25 years
• Time to funding: Approximately 7 days after approval

Qualification requirements:

More rigorous assessments of the financial health of a small businesses before capital is extended, which can make qualification more challenging.

Do you qualify?

• 
  Time in business
  2+ years
• 
  Annual revenue
  $50K+
• 
  Credit score
  650+

Is an SBA loan right for you?

SBA financing is characterized by its low interest rates and extended loan terms, making it a compelling choice for many small business owners. However, it may not suit everyone.

Consider an SBA loan if:

• You are not under time pressure to receive funds.
• Your credit is good, but you do not qualify for a traditional commercial bank loan.
• Cost considerations are important to you.

Equipment financing

Equipment financing provides the capital necessary to lease or purchase equipment for your small business. Since the equipment serves as collateral, you can finance up to 100% of the purchase price and repay it over the loan term.

Key features:

• Funding amount: Up to 100% of equipment cost
• Interest rate: Starting at 8%
• Loan term: 1-5 years
• Time to funding: As fast as 2 days

Qualification requirements:

Compared to short-term loans and other funding options, equipment financing generally has stricter eligibility criteria.

Do you qualify?

• 
  Time in business
  2+ years
• 
  Annual revenue
  $160k+
• 
  Credit score
  620+

Is equipment financing right for you?

When you’re looking to purchase or upgrade equipment, equipment financing is the ideal commercial financing option for you.

Consider equipment financing if:

• You require rapid access to funds to buy or upgrade outdated or damaged equipment.
• You are unable to afford the equipment outright.

Business line of credit

A revolving business line of credit provides you with a flexible pool of funds that you can draw from as needed. Similar to a business credit card, you only accrue interest on the amount you withdraw.

Key features:

• Funding amount: Up to $250,000
• Interest rate: Starting at 8%
• Term: 6 months to 2 years
• Time to funding: As fast as 1 day

Qualification requirements:

Due to their flexibility, business lines of credit typically have somewhat stringent eligibility criteria. Strong sales and a decent credit score are generally necessary to qualify.

Do you qualify?

• 
  Time in business
  1+ years
• 
  Annual revenue
  $200K+
• 
  Credit score
  560+

Is a business line of credit right for you?

If you’re seeking a commercial loan that provides flexibility for ongoing working capital needs, a business line of credit is the ideal choice for you.

Consider applying for a business line of credit if:

• Your funding needs are continuous and may vary over time.
• Project expenses might surpass initial estimates.

Merchant cash advance

A merchant cash advance (MCA) is a lump sum of capital borrowed against a business’s future sales. Unlike traditional commercial loans that are repaid through fixed installments, MCA repayments are deducted either via credit card holdbacks or daily ACH payments.

Additionally, MCAs utilize factor rates to calculate the total repayment amount, which means the agreed-upon total repayment remains the same regardless of whether the advance is paid off early.

Key features:

• Funding amount: Up to $500,000
• Factor rate: Starting at 1.10
• Term: 3-24 months
• Time to funding: As fast as the same day

Qualification requirements:

Merchant cash advances typically have lower eligibility criteria compared to most commercial funding options. This accessibility allows small business owners with limited or less favorable credit histories the opportunity to expand their business.

Do you qualify?

• 
  Time in business
  4+ months
• 
  Annual revenue
  $100,000K+
• 
  Credit score
  500+

Is a merchant cash advance right for you?

If you have an urgent financial need, merchant cash advances (MCAs) can provide quick access to cash to address emergencies promptly.

Consider applying for an MCA if:

• You require immediate funding.
• There is an urgent situation that demands working capital.
• You encounter challenges qualifying for other commercial loan options due to bad credit.

Securing a commercial loan can often be streamlined by filling out an online application, providing recent bank statements, and meeting minimum credit score and revenue criteria.

However, certain loan types like SBA loans may necessitate additional documentation, such as:

• Collateral
• Personal background statement
• Personal financial statement
• Business plan
• Profit-and-loss statements
• Business and personal income tax returns
• Articles of incorporation

Your commercial loan application, credit history, and business finances will be used to evaluate the risk associated with lending funds to you.

With iBusinessLender, applying for a commercial loan has never been easier.

Our simple and secure application connects business owners with top commercial financing options nationwide, allowing you to choose the best option for your business.

The application process is quick, easy, and—most importantly—won’t impact your credit.

What you’ll need to qualify:

• 
  Time in business
  1+ years
• 
  Annual revenue
  $75K+
• 
  Credit score
  540+

Commercial lending rates are determined by the financial health of your business. Various factors that get considered include:

• Personal and/or business credit score
• Loan amount
• Loan repayment period
• Use of funds
• Down payment amount

Additionally, sometimes your rate is based on a benchmark rate, such as the prime rate. Your commercial loan interest rate could be a certain percentage above this prime rate.