A loan contract between a business and a lending institution, either secured or unsecured, providing for the advancement of funds, is called commercial loan. Whether you need funding for start-up or expansion, commercial loans are designed to meet specific needs in the operation of any kind of business. 

Commercial loans are generally made by commercial banks who normally supply capital for business ventures and construction activities on a comparatively short-term basis. Although in recent years, large commercial banks have increased their participation in home mortgage lending. They usually make loans on residential properties with five or more units (apartment complexes), warehouses, office buildings, etc.

Types of commercial loans:

1. Construction & Interim Loans: A construction loan is used to finance commercial construction projects. It involves a series of advances as a building project progresses. You draw funds as needed to pay contractors and suppliers. When the building is completed, the loan is paid off with proceeds from permanent financing. Most construction loans are granted after permanent financing has been arranged. It can be used in improvements for small commercial developments such as apartment buildings, warehouses, shopping centers, strip malls, office buildings, tract residential housing, single family and commercial properties, land development, and other types of income-producing property.

2. Operating Line of Credit: A line of credit is an agreement between the bank and a business customer concerning the maximum short-term loan balance the bank will allow the customer to have during a given period. This type of loan allows you to borrow up to a predetermined limit any time during the commitment period. Interest applies only to the amount you borrow. It is mainly  used to finance temporary, short-term cash needs. It can seasonal inventory purchases, prepayment of bills, or timely payment of other expenses to take advantage of volume discounts, or timely payment of other expenses in anticipation of receiving income. 

3. Overdraft Line of Credit: This loan is tied to the customer's bank account and can be accessed automatically by merely writing a check. It also serves as a protection should an error be made in the customers records which would overdraw their checking account.

4. Commercial Real Estate Loan: It is used to purchase or refinance property, land improvements, building and facilities.

5. Term Loan: You can use this type of loan to finance major equipment or building expansion purchases which can serve as collateral. The amount and period of repayment is determined by the equipment’s economic life, the resale market, the value of the building and land, and the financial condition of your company. It has a maturity over one year. The borrowed funds can be used for a variety of purposes. For example, acquisition of fixed assets, partial financing of the purchase of a business, or refinancing of long term debt.

6. Government Guaranteed (SBA) Loan: The Small Business Administration (SBA) guarantees bank loans to businesses that might not qualify for traditional commercial loans. The availability and types of collateral are considered when the application is reviewed.

7. Accounts Receivable Financing: Your accounts receivable can be pledged as loan collateral. The financial condition of your business, together with the collect ability of the receivables, are also considered. 

8. Inventory Loans: Inventory loans can be made for a percentage of your total inventory cost, with the inventory pledged as collateral. You make payments as your inventory is sold.