Commercial Loan: What It Is, Types and How to Get One

Nerdy takeaways

You can access a commercial loan through a bank, credit union, SBA lender or online lender.
Commercial loans may be structured as term loans or business lines of credit.
Commercial loan amounts, repayment terms, interest rates and qualifications vary by lender and loan type.

What is a commercial loan?

A commercial loan is debt-based financing that’s used to fund business expenses, like purchasing equipment or real estate. With a commercial loan, you borrow capital from a financial institution, such as a bank, credit union or private lender, and you repay it over time.

🤓Nerdy Tip

“Commercial loans” and “business loans” are often used interchangeably. Commercial loan, however, tends to refer to products targeted at larger businesses. These loans are typically available in larger amounts and often require physical collateral. They may also have more in-depth applications and stricter qualification requirements.

How do commercial loans work?

Commercial loans are typically structured as business term loans or lines of credit.

For a term loan, a lender provides you with a lump sum of capital that you repay — with interest — over a specific period of time.

With a commercial line of credit, you have access to a set amount of funds that you can draw from and use as needed. You only pay interest on the money you use, and once you’ve repaid what you’ve borrowed, the credit line resets.

Many, but not all, commercial loans will require collateral. Traditional lenders are more likely than online lenders to require that you put up collateral to secure your loan.

How much do you need?

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Types of commercial loans

Some types of commercial loans are meant for specific purposes, such as:

Equipment financing. These loans can help you purchase large or highly specialized equipment for your business.
Commercial real estate loans. Similar to mortgages, these loans can help you buy or renovate property.
Commercial auto loans. These are used to buy vans, trucks or other vehicles for your business.
Commercial construction loans Finance new building projects or major renovations with these loans.
Commercial bridge loans. This is a type of short-term financing typically used in commercial real estate to take advantage of an immediate opportunity and cover the gap until you can find a long-term loan option.
Commercial hard money loans. Hard money lenders focus heavily on the value of your collateral — usually commercial property or land — when underwriting applications, as opposed to more traditional loan requirements.

Where to get a commercial loan

You can get a commercial business loan from multiple sources: banks, credit unions, SBA lenders, online lenders and even nonprofit lenders. Factors like cost, funding time and your business’s qualifications can help you determine where to look.

Here’s a curated list of some of the top providers offering commercial loans:

Product	Max loan amount	Min. credit score	Learn more
SBA 7(a) loan Apply now with Fundera by NerdWallet	$5,000,000	650	Apply now with Fundera by NerdWallet
iBusiness Funding - Online term loan NerdWallet Rating 4.2 Apply now with Fundera by NerdWallet	$500,000	660	Apply now with Fundera by NerdWallet
Bluevine - Line of credit NerdWallet Rating 5.0 Apply now with Fundera by NerdWallet	$250,000	625	Apply now with Fundera by NerdWallet
JR Capital Equipment Financing NerdWallet Rating 4.1 Apply now with Fundera by NerdWallet	$10,000,000	620	Apply now with Fundera by NerdWallet
TAB Bank - Term loan	$300,000	660

How to get a commercial loan

Read our guide for detailed information on how to get a business loan and to calculate your estimated loan payments.

» MORE: How to get a business loan

Frequently asked questions

What are some alternatives to commercial business loans?

If a commercial loan doesn’t make sense for your business, consider these alternatives:

Short-term loans may be a better option for your business if you need to manage your cash flow or cover daily expenses. They’re usually available from online lenders and fund quickly but often have higher interest rates.
Small-business grants can help you to avoid debt entirely. Although grant applications can be competitive, they’re a great solution if you can secure one. They’re available from federal, state and local governments, as well as private corporations.
Business credit cards can help you spread purchases out over several payments. Still, their relatively low credit limits may make it challenging if you need to finance a substantial purchase. You might also consider a personal loan for your business, which will likely offer a higher limit than a credit card but may come with a higher interest rate.

» MORE: Business credit card vs. business loan

Do commercial loans require collateral?

Many, but not all, commercial loans will require collateral. Traditional lenders are more likely than online lenders to require that you put up collateral to secure your loan.

Is a commercial loan the same as a business loan?

Essentially, yes. Both of these terms refer to money that you borrow from a lender to pay for business expenses and pay back over time. However, sometimes “commercial loan” is used to describe loans for larger companies, and “business loan” loans for smaller companies.

Rosalie Murphy, a NerdWallet lead writer, contributed to this article.

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