Business Talks

Commercial lenders are financial entities that offer commercial loans to potential borrowers with fixed or variable interest rates. But collateral must back up each commercial loan being made to the borrower.  Collateral can come in many forms such as real estate, inventory, equipment, receivables, and other assets. Other things that entice business owners to seek a commercial loan from commercial lenders are the following: the processing of loan application is faster, the criteria set by these lenders when qualifying borrowers is more lenient and the payment terms are more convenient. In spite of these factors, there are also drawbacks when dealing and accepting the commercial loans offered by commercial lenders. It is therefore essential to know what these drawbacks are and how it may affect one’s business.

One downside when a business borrows money on a commercial loan from a commercial lender is that the borrower has to pay interest on that loan. It is crucial to scrutinize the total cost of the loan, including the interest rate as well as the settlement terms, and to be sure to find a lender that offers the most attractive terms possible.

Aside from the interest rate, the borrower may also face other unnecessary fees and charges that may be a burden for him or her in the long run. Examples of these are fees at loan origination, maintenance fees, non-usage fees, deposit fees, etc. Certain fees vary depending on the type of commercial loan the borrower gets.  The Borrower should be sure to find out all of the fees in advance, and work to get the best financing possible.  Sometimes a commercial loan broker / consultant can be utilized by Borrowers to assess the market and work to find the best rate, term, fees, and total cost for the requested commercial loan in the market. 

Last but not the least, the risk of losing the collateral that the business owner used as back up when he or she took out the commercial loan is always a possibility. If by any chance the borrower fails to repay the entire loan, the commercial lenders will have some rights to the collateral pledged and could end up taking ownership of it.  This can create a problem for many companies, because it could spell doom for that company if that collateral is essential for business operations.  By carefully analyzing the commercial loan offered by each commercial lender and by sticking to the payment terms agreed upon by both parties, then the borrower can prevent this scenario from happening.