commercial business loan

With the economy picking up speed again after the negative growth rate of 2020, many small businesses and startups are looking to take advantage of low interest rates to expand. This frequently means considering a commercial business loan. But the prospect of taking out a loan on your company can be intimidating for business owners who have never looked into financing options before. In this article, we will cover the steps you will need to take to secure a commercial business loan. We’ll also touch on where to find a lender and what supporting documents you can have ready before meeting with one so that you can streamline the process once you’re ready to get started.

What Types of Commercial Business Loans are Available?

There’s a famous saying in the world of business, “In order to make money, you have to spend money.” This saying isn’t far-fetched. But most people don’t have starting capital just lying around ready to use. That’s where business financing comes in. It can help you secure funds for commercial real estate, a line of business credit, inventory, or anticipated payroll.

There are many different types of commercial loans you can apply for:

  • Equipment Financing
  • Commercial Real Estate
  • Term Loan (a flexible loan with a consistent repayment schedule)
  • Business Line of Credit
  • SBA Loan
  • Commercial Auto Loan
  • Bridge Loans (to help fill the gap between what the company needs right now and their anticipated needs in the future)
  • Commercial Construction Loans
  • Inventory Loans

Regardless of your needs as a small business owner, this list should provide you with ample means for receiving funding.

Items to Consider Before Applying

Applying for a commercial business loan is different than applying for a personal loan or a house mortgage. Lenders take a considerable risk with businesses. As the economy swings, a company could be here and thriving one day and be gone the next. They consider this when deciding whether to work with you to provide financing. Especially if you’re launching a new business, as you won’t have evidence of cash flow to prove you can pay back the loan. Even established companies will need to provide substantial proof that not only are they bringing in revenue, but they’re also growing as an organization.

What do Lenders Look for When Applying for Commercial Loans?

The hard reality is that the business loan application process can be long and tedious. As a business owner, if you have a poor personal credit history, the chances of getting approved for a commercial loan drop significantly. Why? Because the first thing lenders will look at when processing your application is your ability to pay back the loan. They’ll analyze your personal finances, business revenue, credit rating and credit history, unpaid debt, and how much money you have personally invested into the business. They will also look at your personal experience and character to assess whether you make a responsible investment. This could include your education, business experience, and references. So, it’s essential to work on your credit history before applying for a commercial business loan. Pay off debt and keep making monthly payments on your bills. Increase personal lines of credit. If you can show that you have a healthy relationship with money and pay your bills on time, you’ll have a better chance at getting what you need.

Lenders will also want you to provide some collateral. Providing collateral gives you a lot more wiggle room when it comes to negotiating with lenders. They’ll see you as less of a risk because if you cannot repay the loan and default, they will have your collateral as a backup to ensure they get paid. They’ll accept both tangible and intangible assets to be used as collateral, such as vehicles, real estate, accounts receivable, and inventory. You can also make a personal guarantee by providing your own assets as collateral that are unrelated to the business.

When business owners invest in the organization, lenders have a more positive take on the owner’s chances of paying the loan back. Because of this, business capital will be scrutinized extensively. Lenders will want to look at how much you’ve invested in your business stocks and bonds, equipment, and property.

The last items that lenders will look at are the external conditions surrounding the business, including conditions that the business owner may not have control over, such as current economic conditions, competition, the health of the industry your business is in, and the local environment. If you, as the business owner, can prove that the market conditions for your business are on the upswing, you increase your chances of securing a commercial business loan.

Where to Find a Lender

When looking for a lender, the first step will be to identify the type of loan you’re looking for based on your business needs and the loan amount you will be seeking. Not all lenders provide the same kinds of business loans.

Many people start with the SBA (Small Business Administration) when securing their first commercial loan. That’s because the SBA is well-versed in helping small businesses get started and expand later on. They have insight into current market trends, provide counseling and education, and have many small business loans available. Plus, their APR is also typically lower than other lenders.

If the SBA doesn’t quite have what you need, other options are available. You may want to start by talking with the bank you currently use for either personal or business banking or seeking an alternative online lender like Biz2Credit. You can also reach out to your network and seek out loans from family and friends, though many prefer not to mix business with pleasure.

What Paperwork Should You Have Ready to go Before Applying?

It’s beneficial to have all paperwork handy before you start the application process for a business loan. This will ensure you accurately input information from your business financials and that you’re ready for any unexpected questions.

There are multiple documents you will want to have ready before you apply:

  1. Your Resume: Believe it or not, your resume can provide lenders with an idea of your previous business experience and can help them decide if you’re a lower or higher-risk applicant. Suppose you were a manager, owned other businesses, or have your education added to your resume. In that case, this little document can provide a world of knowledge about who you are and what experience you bring to the table.
  2. Business Plan: It doesn’t matter if this is your first loan application or your 50th. Having your business plan handy will allow lenders to have an inside peek into your strategy for growth, operations, target customers, plus analytical tools like a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).
  3. Personal Credit Report: Even though your lender will pull up this information on their own, it’s crucial you also access it before applying. You’ll want to thoroughly comb your report for any errors or inaccuracies if you find anything that is taking your personal credit score down, and you will want to get that fixed before applying.
  4. Business Credit Report: Similar to the personal credit report, even though the lender will pull this report themselves, you will want to check it for anything inaccurate.
  5. Personal and Business Income Tax Returns: Most programs will require that you submit both personal and business tax returns with a commercial loan application.
  6. Financial Statements: You’ll want to have your balance sheet, profit and loss statement, cash flow statement, and bank statements attached to the application. There should be a minimum of one year of statements, though if you have two years, attach both. This can better show your business growth.
  7. Accounts Receivable and Accounts Payable: Commercial lenders want to see your current assets, and your accounts receivable is no exception. They want to know where your flow of revenue is coming from and where it’s going, so make sure you have both of these documents ready.
  8. Collateral: If your lender will require collateral, be sure to have any necessary paperwork ready and available before applying.
  9. Legal Documents: All legal documents for your organization should be included with the application. These can consist of your business license, permits, articles of incorporation, franchise agreements, third-party contracts, employer identification number, and commercial leases.

What Now?

Once you’ve established a potential lender and compiled the necessary paperwork, you’re going to want to reach out to the lender and schedule a one-on-one with a loan officer. Be prepared for scrutiny, though. Commercial lenders are very picky about who they decide to approve loans for. Because of this, you are going to want to bring your A-game.

Create a presentation ahead of time that includes all of your current business highlights. Include any wins that your business might have: new clients/customers, testimonials, employee retention score, and a clear explanation of why you need the loan. At this point, you’re trying to “sell” yourself to the lender so that they believe you can and will repay any loan they give to you.

The biggest thing to remember is that financial institutions will see your business as a risk. You have to convince them that the risk will be worth the reward and that you will be capable of paying back your debts. If necessary, and your personal credit is excellent, ask about co-signing the loan yourself to improve your odds of getting approved. But remember, that increases your personal risk.

And the last thing to do is wait. As mentioned above, the process of getting a commercial business loan can be tedious, especially for large loan amounts. There’s a lot of paperwork, meetings, possible negotiations, presentations, and decision-making that may need to happen before you finally sit down to sign the loan agreement. It’s a process that can require some patience.

If you want to speed up the process a bit, consider checking out an alternative lender that will let you file your application online and provide you with a decision in minutes.


Applying for a commercial loan can be just the thing that will enable you to take your business to the next level. The process may seem overwhelming at first, but once you understand the requirements, there’s nothing to it. Yes, you’ll have to gather your paperwork and it may take several meetings to get the final approval—so it will take some time. However, now that you know what to expect it should decrease your stress and make the process manageable. And remember, you don’t have to do this alone. You can always get a professional to help you.

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