What types of loans can businesses obtain from a bank? The answer, although not complicated, is surprising to many. For a business, banks have loans for every business purpose. Commercial loans include all types of loans that enable a business to prosper and grow. The major types of loans are:
- Working Capital Loans
- Equipment Loans
- Commercial Real Estate Loans
- SBA – government guaranteed Loans
- Mergers and Acquisitions
Working Capital Loans
These loans, or lines of credit, are used to finance the day to day operating costs of running a business. Typically, the term is one year or less, and they are secured by current assets (inventory and accounts receivable). These are very necessary to meet the daily cash flow requirements of a business. They are self- liquidating and are paid from the collection of receivables and conversion of the inventory.
These loans finance the purchase of equipment used in the business. The terms generally match the usable life of the equipment, and the loans are secured by the purchased equipment.
Commercial Real Estate Loans
This category includes all types of commercial real estate, such as owner occupied or investment real estate. Banks provide all types of loans secured by real estate. Owner occupied loans are secured by the real estate necessary to support the business; manufacturing plants, warehouses, etc. Investment real estate loans are those loans that support the purchase or development of real estate for investment purposes, such as housing developments, apartments, office buildings, etc. The terms are negotiable, but typically are 5 – 10 years and are secured by a mortgage on the real estate.
Small Business Administration (Government Guaranteed) Loans
These loans are designed to support small businesses that may need some enhancement to support the request. They could be a start-up or for other reasons need enhancement for a bank to provide a loan. The enhancement is a guarantee by the U.S. Government for a percentage of the loan. Banks that participate in the SBA program can provide working capital, equipment, and real estate loans. This is a great source for new businesses or small companies.
There are many other types of specialized loans such as loans for mergers and acquisitions, but the above covers a majority that could be needed by a business. At Univest, our Commercial Banking Division has “loans for every purpose” and we are a Preferred Lender with the SBA. Now is still a great time to borrow, so talk with a Univest Relationship Manager about your lending needs. Contact us at 877-723-5571.
Univest Bank and Trust Co. is an Equal Housing, Opportunity and SBA Preferred Lender