Commercial Financing
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Commercial financing is a pretty broad term. The term "commercial" simply means "business". For purposes of this discussion, let's make a distinction between commercial real estate financing and other forms of commercial financing.
Commercial real estate financing obviously refers to the commercial financing of income property, which includes apartment buildings, office buildings, retail buildings - including commercial shopping centers and commercial strip centers, industrial buildings, hotels and motels, self storage projects and other, more specialized, commercial properties.
It is important to note that commercial real estate financing does not include loans for homes, condo's, duplexes or even even four-plexes, even if these properties are rentals and generating income. Loans on one-to-four family properties are considered residential loans, not commercial financing. The reason why is because the GSA's (government sponsored agencies), like Fannie Mae, Freddie Mac, and FHA, will buy or guarantee loans on one-to-four family dwellings.
There are many other types of commercial financing. Commercial financing includes loans on accounts receivable, equipment loans, inventory, flooring lines, and even unsecured lines of credit.
Accounts receivable financing is a form of commercial financing. Suppose a dress maker sells its dresses to dress stores on credit. The manufacturer might ship 30 dresses to the La Contessa Dress Shop on credit, with terms like 30 days, 2% net 10. In other words, the dresses must be paid for within 30 days, and there is a 2% discount if the bill is paid within 10 days. Now if the dress manufacturer suddenly needs money, they could pledge their accounts receivable to a bank for a loan.
Another form of commercial financing is equipment financing. Suppose you are a small manufacturer in the injection molding business. Business is good, and you need a new injection molding machine. it's possible to go to a bank and get the bank to finance your purchase of a new machine.
Inventory financing is another form of commercial financing. Let's suppose you manufacture replacement keyboards for computers. Suddenly you learn that you can purchase a huge shipment of plastic from a failed competitor for pennies on the dollars. It's possible to go to the bank and pledge your inventory of completed keyboards in return for a loan to buy that plastic.
Flooring loans are another form of commercial financing. Your local car dealer has 100 cars on display for you to buy. Do you think he owns all of those cars free and clear? No. He has a flooring line of credit from the bank.
I own a commercial mortgage company. From time to time I have a lousy month. When I do, I simply draw down on my unsecured line of credit at the bank to cover payroll. Unsecured lines of credit are just one more form of commercial financing.
As you can see, commercial financing includes far more than commercial real estate financing. It includes all sorts of commercial financing.
Do you need commercial financing for an income property? You can submit your commercial financing needs to 750 different commercial financing lenders in just four minutes using C-Loans.com. And C-Loans.com is free! Click here for immediate commercial financing.