An Overview of Common Types of Commercial Loans
Commercial loans are loans provided by banks to various types of business entities. Some loans are intended to help a company fund its day to day operations, while others are meant for the purchase of new business machinery.
Below are a few common types of commercial loans available today:
Bank Guarantee Loans
On a client's behalf, a bank may issue a letter of guarantee known as a bank guarantee addressed to a third party. Learn more about it at http://plgcapitalllc.com. The letter mainly promises that the bank will pay the third party a certain amount within the indicated period.
Term Loans
A term loan is a typical loan a bank provides for business purposes, to be settled over a set duration. It usually comes with a permanent interest rate, a monthly or quarterly payment schedule and a maturity date. A term loan can either be secured (with collateral) or unsecured.
Construction Machinery Loans
Construction equipment loans are, as the name indicates, Fix and flip loans meant to enable a company to purchase construction machinery like backhoe loaders, excavators, cranes and the like.
Lease Finance Loans
In lease financing, an individual or company is allowed to own or use specific assets over a medium to long-term financing period in return for previously arranged interim payments. Here, the lessor or the finance company buys the asset, thereby becoming its legal owner.
Commercial Vehicle Loans
Commercial vehicle loans provide funding for the purchase of vehicles like trucks, buses, tippers and so on. Learn further data about this through the site at http://www.ehow.com/business/small-businesses/small-business-loans/page2/. Tenure often varies from one to five years, depending on the borrower's repayment capacity.
SME Credit Card Loans
An SME credit loan is given either as cash credit (payable over 3 years) or in the form of a term loan (payable over 5 years), and is given to small and medium enterprises.
SME Collateral Free Loans
This is another commercial loan given to SMEs and do not require collateral or a third-party guarantee. It is given to SMEs at the start-up phase and the existent phase to add fresh capital and provide support for future expansion.
Letter of Credit Loans
A letter of credit is a document issued by a bank to a seller, assuring that payment will be made. There are other documents a bank requires from a borrower before it issues this letter. This type of commercial loan is usually used in trade financing, in which the two sides are not very familiar with each other, or when items are sold to customers in another country.
Bank Overdraft Facility
A bank overdraft facility is a company's ability to withdraw funds greater than what is available in its current account. How much can be withdrawn in excess and the interest rate to be paid will be agreed upon before the facility is granted. An overdraft facility is considered an option for short-term funding because it can be repaid with the next deposit.
