Here’s What You Need to Know When Availing a Commercial Loan

When it comes to funding a commercial spending objective, it is best to seek out a financing option that serves just right multiple business expenditures. Financial institutions provide several funding options that one may choose from to address his/her financing needs related to a business. One of these funding avenues that has gained prominence is the commercial loan introduced by lending institutions lately, which aptly addresses diverse business funding needs without much lender checks.

When availing these loans, it is best to be well-prepared with necessary information that can help back your borrowing decision related to commercial expenditures. Check out some of the essential details related to the loan that can help you with the necessary financing decision.

What are Commercial Loans?

A commercial loan is a type of financing option that is dedicatedly designed to help business owners fulfil their funding needs of significant value. These advances come with favourable features that allow a borrower to manage the loan efficiently. 

For instance, the eligibility norms laid down by lenders are simple and easy to meet. One can also select a suitable tenure for repayment of the loan, which allows him.her to keep the EMIs affordable while keeping the interest payable in check as well.

Type of Funding

These loans are often available as unsecured funding avenues, and do not require a borrower to provide any asset as collateral to raise finance. It thus keeps the borrower free of any risk that such funding might bring to any personal or business asset. The only thing one needs to take care of is that he/she must meet all eligibility requirements, and meet a minimum credit score mandate of 700 or above to avail funding. 

Repayment of Commercial Advances

You can choose to repay your commercial loan in simple EMIs computed during loan sanction. Under EMI payment system, each instalment is computed based on the lender’s amortization schedule, whereby the EMI includes both principal and interest components varying based on such a table. Nevertheless, the EMI amount remains the same.

When planning to borrow the advance, make sure to check if the instalment is affordably accommodated in your monthly finances or not. You can use a loan EMI calculator to assess EMI affordability based on your loan amount, tenure, and interest rate. While not much flexibility is available in loan amount and interest rate levy, you can make changes to the tenure value to bring significant difference to the EMIs payable, total interest payable, and the total loan liability. 

Businesses can also choose line of credit as an affordable financing arrangement, wherein multiple withdrawals are allowed from a single loan sanction. Further, the facility also helps check the total loan liability and the interest payable through interest levy only on the withdrawn amount and not on the total sanction value. This facility is usually beneficial for a business when some kind of recurring expense is to be met periodically. 

Rate of Interest

Several lending institutions provide these loans today, which makes it easier to find lenders offering competitive commercial loan interest rates for improved affordability. The interest rates on these types of business loans are nominal. Further, after improving on a few financial factors related to your borrowing profile, you can undertake to negotiate with your lending institution for a reduction in these rates.

For instance, you can work up on your individual and business credit score, pay back existing debts, reduce your fixed monthly liabilities, and utilise not more than 30% of total credit available.

Additionally, when applying for the loan, keep all financial documents updated and in place, which should help the lender assess your borrowing profile more appropriately. With well-planned-out financials of the business, it can get convenient to secure favourable rates on your commercial loan.

Application Process

You can apply for these business loans both online and offline. When doing so in person, you would need to visit the nearest branch of your selected lender and fill up the application form. Simultaneously, submit the necessary personal, business, and financial documents.

The alternative, i.e. the online application process is much simpler though. All you need to do is visit the official website of your financial institution. When there, navigate to the product page and choose the application option to proceed. Next, fill out the application form with accurate details and submit documents without needing to step out for any requirement.Once applied, the loan application is initiated for further processing, borrowing profile assessed and validated, and the loan amount approved. Before applying, it is crucial that you check if you meet all commercial loan eligibility requirements or not as missing out on any one can hamper approval, slowing down the entire process, or even lead to rejection. Make sure to compare lending institutions as well based on rates and features available before deciding.