Loans is the form of lending which a person takes from the financial institution to meet his/her financial needs, in return of interest that he/she is liable to repay with the whole amount taken as loan. Loans of many kinds are taken by the people as per their requirements.Commercial loan is just one of the vairous kinds of loans commonly taken by the people.
Commercial Loan as the name suggests is meant to fulfil the commercial needs of the person, who applies for such kind of loans. The commercial needs can be to fulfil the order, consignment, or it can be other way like buying new machinery, raw material etc. Therefore the main feature of commercial loan that is distinct from other kinds of loans is that it is meant to earn profits. This money can be used in the manufacturing, producing or any other kind of business requirement.The amount taken as commercial loans is mostly bigger than any other loan amount. Similarly the interest on commercial loans are comparatively much lesser than any other loan.
Comparison with the personal loan and refinance loans.
Personal loan and refinance loan are such loans which are mostly confused with commercial loans. Lets just go through the meaning of the two kinds of loans and the basic difference between them and the commercial loan.
Personal Loan is one which a person takes to fulfill his/her need or wish to buy a product for necessity or leisure motive as the case may be. The personal loan can be taken for buying a new car, motorbike, investing in stocks, home finance etc.
Refinance Loan is that which is taken to fulfill the requirements and payments of the old loan that was taken to buy some product. Inability of a person to repay that loan on the foresaid period of time results in the refinance of loan. Through loan refinance the lended money of one financial institution is paid by the other institution. This is done on behalf of the lender. And the same lender has to pay the new financial institution his/her part of loan with the new deals which is made after mutual consent.
The difference between the personal loan and the commercial loan is that while the commercial loan is meant to meet the business objectives, the personal loans are meant to meet the personal objectives. Thus the commercial loan is taken to finance the business operation, while the refinance loan is taken to refinance the already financed loan amount for repayment purpose.
Features of Commercial loans.
The commercial loan as stated above are meant to earn profits. Big business houses take commercial loans to fulfill their production requirements, or complete their tender or any other business requirement. The other features of the commercial loans are as follows.
Commercial loans are not taken for consumption purpose.
Commercial loans are taken mostly by business class people.
The rate of interest is lower in case of commercial loans as compared to other kinds of loans.
The period of repayment of commercial loan is lesser as compared to the other loans.
The amount of commercial loan is always bigger than any personal loan etc.
Therefore the commercial loans are the cheapest kinds of loans available in the market as compared to other loans.
Requirements for commercial loans.
The commercial loan requires some pre-requisites for their approvals. These are as follows.
Commercial loan lender needs to specify the kind of investment they are going to made for which the loan is demanded.
Insurance of the material or goods etc bought by the loan money is necessary to be made, so as to confirm the repayment in case of some accident, mishappening, or fire etc.
Their are some conditions applied on the commercial loans. As the Commercial loans are given for a limited period and that too at lowest interest rate, so in case of inability for repayment, the lender is bound to pay fine charges.
Proper name of the company dealing with, the money transaction of the loan amount and other information can be asked for by the financial institution at any time in between the loan period.
Book keeping is essential before and after application and allocation of the loan amount.
Thus the above stated commercial loans requirements are essentials that needs to be fulfilled. Some other conditions may vary from one financial institution to other as according to their policy for lending. In case of inability to follow the above instructions the lender may have to face legal actions against him/her and the company as well.
Governmental aid in the form of commercial loans.
All the countries of the world gives an aid to the people applying for commercial loans. That is the loan given to the Industrialist. The main motive is aid them financially so that they can run a good business in the country and one day becomes international and makes good name and money for the country. Government aid in the commerical loans can be observed in the following ways.
i. Giving subsidies to the industrialists so that the financial problem or scarcity may be removed up to some extent. Thereby helping to fulfill their tender, order etc and become economically self dependent.
ii. In some case the government may offers to pay half amount or ful amount to the financial institution from its own treasury to boost the business of the necessity goods industry.
iii. Some agricultural goods are also given subsidies so that the imports from the outside of country can be counterfeit.
Need and fulfillment of Commercial loan and loan rates.
The need of commercial loan rises when an industry or production house lacks the finance to fulfill its raw material or any other needs to dispatch its order.
Also in cases when people try to take big orders, even when they know they do not have enough capacity to invest. Still to increase the outlook and increase the growth pace of the industry such orders are considered important. Therefore the reason is to increase efficiency, capacity, work ability and outlook of the company commercial loans are taken.
What ever may be the reason, the commercial loans proves best for the business people in many cases. The fulfillment of such requirements in the form of the commercial loans is done by the various financial institutions. Some of the noteworthy institutions and their fixed and variable commercial loan rates are as follows.
Westpac Banking Corporation gives loan @ 8.24% fixed and 10.84% variable.
Victoria teacher’s credit union @ 11.5% fixed.
Suncorp @ 8.49 fixed and 8.94% variable.
Starfund @ 8.60 fixed.
St. George Bank @ 9.30% fixed, 8.91% variable.
Savings and loans credit union. @ 8.22% fixed and 8.19% variable.
All the above stated organization offers commercials loans and that too at lowest and competitive interest rates. These corporations prefixes with mutual consent and understanding the following items with the lenders.
ü Interest rate been charged on loan amount.
ü Fees or file charges.
ü Mode of repayment of the actual amount and interest amount.
ü Time frame for repayment of the Loan and interest.
ü The fine percentage in case of inability to repay loan premium.
ü Selling of the security in case of inability to repay the full loan amount. Etc.
Commercial loans are meant to fulfill the immediate or business requirements of a firm. The interest rates on commercial loans have become more competitive these days with comfortable repayment methods being introduced by many loan giving organizations.
The writer thanks the useful information suppliers during the writing of this article including, the c-loans.com, , mortgageloan.com, steelheadcapital.com, realwebfunds.com and commercialbanc.com, without whom help the aritcle would not have been completed.