A commercial loan is money that a business borrows from a bank, credit union, or private lender to fund business-related expenses. Unlike a personal loan, which is for individual use, a commercial loan is tied to business activities.
Businesses typically use commercial loans for things like:
- Buying real estate (office buildings, warehouses, retail spaces)
- Purchasing equipment or machinery
- Expanding operations
- Covering working capital needs (payroll, inventory, day-to-day expenses)
- Financing construction or development projects
Key points about commercial loans:
- Borrower: Usually a business entity (LLC, corporation, partnership), not an individual.
- Collateral: Often secured by property, equipment, or other business assets.
- Loan terms: Can be short-term (a few months to a couple of years) or long-term (up to 20–30 years, especially for real estate).
- Interest rates: Usually depend on the borrower’s creditworthiness, the loan type, and market conditions.
- Repayment: Regular installments (monthly/quarterly) of principal and interest.
👉 In short: A commercial loan is business-focused financing, helping companies grow, invest, or manage operations.