Short-term Commercial Financing Options

by : Aidan Kellsey

Short-term Commercial Financing Options After Your Commercial Mortgage

To buy warehouses, buildings, and operations centers, business utilize commercial mortgages. Businesses are likely to need funds for other expenses in its operations and commercial mortgage will be unable to accommodate these. Businesses have several options and chances for finding funding from various sources of commercial financing that is on hand.

There are 3 types of commercial financing loans: long-term, medium-term, and short-term. Short-term commercial financing options on hand will be discussed here.

With a maximum term of only one year, short-term loans are very common. Some common types include:

1. Operating Loan. This is for a business' different operating expenses. Though some lenders give extensions, full settlement is needed at the end of the usual 3-6-month terms.

2. Business Line of Credit. This is a very popular commercial financing type and is offered by banks for 24 months. Just like a credit card, a business can borrow from an imposed credit limit.

3. Business Inventory Loan. Business inventory loans have terms of normally between 6 and 9 months. Funds are provided for the purchase of seasonal supplies. Proof that they will be able to repay the loan and that it's seasonal are needed by banks and commercial lenders from the business.

4. Accounts Receivable Financing. In accounts receivable financing, companies put up receivables as a collateral for the loan. Collateral is chosen among certain receivables. The loan is assessed upon 60% to 80% of the receivable's value and must be settled when the product is sold.

5. Factoring. A business can sell its receivables to a factor who takes over the danger and provides discounted but immediate funds if the business does not qualify for an accounts receivable financing loan. The factor is paid by the end-customer. This is a very costly option.

6. Letter of Credit. If a business doesn't have the funds to purchase supplies and inventory from a vendor, a letter of credit is issued. If the businesses cannot pay the vendor, the bank will guarantee settlement, charging a percentage point rate on the funds.

More than the typical commercial mortgage, these are only some short-term commercial financing products. Commercial mortgages are perfect for the purchase of commercial properties, but there are various other commercial financing options and products beyond commercial mortgages.