Commercial Loan

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Commercial Loans are granted to companies that may be a limited liability company or a sole proprietorship. These loan are provided after careful review of the tenor the company, its customers, its turnover, its assets and liabilities and sometimes the Bank or the Financial Institution also may request for the audited financial statements to conclude whether or not to approve a loan. The kind of checks done at the backend is generally required as the loan amount or what they call technically (ticket size) is higher than that of a Personal Loan.

These loans can be secured or unsecured. Some Banks or Financial Institutions may require security or a collateral before approving such loans. Secured Loans are those wherein the company or the legal entity will be required to provide a security to the Bank or the Financial Institution to cover for the Loan and for the Interest incase the company is unable to fulfill their agreement to pay monthly EMI.

Commercial Loans are sometimes provided as cash to meet the working capital requirements of the company and sometimes provided to meet the fixed cost requirement i.e buying of heavy machinery and tools required to carryout day to day activities.

Any finance provided to meet the fixed cost requirement of the company is backed by Assets which the company intends to buy generally know as Asset Based Finance or Asset Backed Loan. These loans are provided by Banks and Financial Institutions after calculating depreciation along with various other factors that will affect the overall performance and the value of that Asset.

Interest charged on such loans is generally high and the company has to make sure that they earn a rate of profit higher than the rate of interest paid on cash loans or the loans provided for purchasing Assets.