A commercial loan can be a great choice in many situations, from starting a business that you know will be profitable to expanding what you already have.
Commercial loans allow business owners to take steps forward and grow their enterprise without the need for raising the money upfront. The right loan can be a valuable helping hand to achieving goals and generating much more revenue in the long-term.
But there’s a lot to consider. You need to make sure you’re getting a loan for the right reasons, and whether you’re getting the best deal for your situation. In this article, we’ll look into some of the main reasons to get a commercial loan and how to do it right.
What Is a Commercial Loan?
A commercial loan is a loan between a company and a bank, usually meant to cover expenses that are currently beyond the company’s budget. Usually, the borrower will have to make a case to the lender that they have a sensible plan for the money and will be able to pay it back.
Why Get a Commercial Loan?
There are many reasons why you might consider taking out a commercial loan. Here are some of the main ones:
- Starting a business. Perhaps you’ve always wanted to open that restaurant or develop a new app, but you don’t quite have the funds. A commercial loan can provide you with that important first push to get your venture started.
- Purchasing new equipment. Many businesses, for example in the construction industry, need up-to-date equipment to ensure they do their jobs well and meet requirements. In Mackay, the coal industry has spawned a variety of businesses like this. Sometimes this equipment can be expensive, and a loan can help you cover the costs in a more manageable way.
- Relocate or upsize to a new HQ. Outgrowing your current premises is a common problem for businesses. Relocating to a new place can allow your business to grow and develop much more effectively, but making a move like this can be costly. A commercial loan can help you do it affordably.
- Open a new location. It may be time to add a new location to your business. This way you can expand your geographical reach and start serving customers in a new place. A commercial loan can be a great way to cover the upfront costs of opening up a new branch that you know will soon be profitable.
- Hire new talent. A company is only as good as the people it employs. If you want to expand and grow your business, it’ll be crucial to hire more people, and ideally, you will want to hire talented and qualified staff. This can be expensive — and a commercial loan can help you make that initial investment in promising human resources.
- Embark on a new venture. You may have identified a lucrative new opportunity for your business that could bring in a huge amount of revenue over time. However, starting on a new venture is like opening a new business from scratch — it costs money. Fortunately, a commercial loan could give you the helping hand you need.
How to Get the Best Deal Possible
As with all loans, it’s important to make sure you get the best deal possible with your commercial loan. Here are some ways you can maximise your chances:
- Work with a broker. A broker can help you navigate the complex world of applying for a loan and getting approval. Brokers, like Lynam Home Loans, can also get deals that might not be available to the public, combing through multiple lenders to find what’s right for your circumstances.
- Look at multiple options before you make a commitment, but not too many. While it’s important to shop around to some extent to make sure you get the best deal and terms, visiting too many lenders can work against you. It can make lenders feel you aren’t worth their time because it’s unlikely that you’ll opt for them over the dozens of others you’ve contacted. It may be best to concentrate your efforts on a limited pool of promising lenders.
- Be organised and bring all the info you need. Always shop up to meetings on time with all the relevant documents. This can include tax returns, details of your finances, and anything else that was mentioned beforehand. It places you in the best possible position to make a great first impression and successfully state your case.
Red Flags to Look out For
- Discrepancies in things like the term of the loan. Does the contract match what you discussed? If there are things that don’t seem right, this is something to address before making any commitment.
- Payment terms are longer than the life of equipment financed. If you’re using your commercial loan to hire equipment, you’ll want to complete the payments while you’re still using the equipment. Otherwise, you run the risk of paying for a disused piece of equipment, while also paying for its replacement.
- Beware 100% guarantees for loan approvals. Even though good lenders should be able to give high rates, nobody should be able to approve every application. This is a sign that they have no standards or professionalism.
The best way to get through the complex process of applying for and getting a commercial loan is to work with a broker. At Lynam Home Loans, we have years of experience helping our customers secure the best commercial loan for them, so they can grow their business and move forward. To find out more, get in touch.