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The Definition of Commercial Loans

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A commercial loan is a debt-based agreement between the business entity and lending institution that will typically fund major capital expenditures and other operational costs. Along with the operational costs, these short-term loans usually finance the purchase of equipment, for instance.

Small businesses also apply for commercial real estate loans. These loans are designed for business purposes only and include retail centers, office complexes, hotels, and apartments. If you are an individual looking for a commercial loan, you should better consider a residential mortgage.

Business entities that apply for commercial mortgage bridge loans don’t need a credit history. They can provide a credit history of the certain individual that would accept a liability of the possible default.

Repayment period is usually tailored toward regular installments. The most popular form of the commercial property loans is the 20-year fixed-rate mortgage. Longer repayments periods are possible but they include higher interest rates and smaller regular payments. If you can afford larger monthly payments, it’s better to apply for the smaller repayment period and lower interest rate.

You should also remember that interest rates on commercial loans are typically higher than on residential ones. They also include such fees as appraisal, legal, loan application, loan origination and/or survey fees. The other tricky thing is that some fees must be paid before a loan is approved or rejected.

When business entities apply for commercial mortgage bridge loans, lending institution considers their collateral and creditworthiness. So, make sure you are ready to qualify for the loan or find another cosigner for your request.

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