Welcome to the first installment of our comprehensive commercial lending FAQ series. Here’s the thing: every single day, we field dozens of questions from business owners and real estate investors trying to navigate the world of commercial financing. And the same questions keep coming up again and again.
That’s exactly why we are writing this series.
We’re taking the most common questions that hit our desks and breaking them down into clear, no-nonsense answers. No industry jargon. No confusing double-speak. Just straight talk about how commercial lending actually works.
This first article tackles the fundamentals. The basics every borrower needs to understand before diving into the commercial lending pool. Think of it as your foundation. Because honestly? If you don’t understand these core concepts, everything else becomes needlessly complicated.
So let’s cut through the confusion and get you the answers you need.
What is a commercial loan? How does it differ from a business loan?
Here’s something that trips up a lot of people: commercial loans and business loans are essentially the same thing. Both terms simply designate that the financing is not a retail or personal loan – it’s for business purposes.
You can use these terms interchangeably without any confusion. Think of it like calling a soft drink “soda” or “pop” – different words, same thing.
That said, there’s a subtle industry nuance worth knowing. Some lenders and brokers tend to use “business loan” when referring to smaller working capital needs – things like inventory financing, payroll support, or short-term cash flow solutions. Meanwhile, “commercial loan” often gets used for larger deals, particularly commercial real estate financing.
But honestly? Don’t get hung up on the terminology. What matters is finding the right type of financing for your specific needs, regardless of what it’s called.
How do commercial loans differ from personal loans?
This is where things get interesting. Commercial loans are designed for business purposes, while personal loans are for individual consumer needs like home improvements, debt consolidation, or major purchases.
The approval process is completely different too. With a personal loan, lenders primarily look at your personal income, credit score, and debt-to-income ratio. It’s all about you as an individual borrower.
Commercial loans? That’s a different ballgame entirely. Lenders evaluate your business’s financial health, cash flow, revenue patterns, and often the value of business assets or collateral. Sure, your personal credit might still matter, but it’s just one piece of a much larger puzzle.
The loan amounts and terms are typically much larger and more complex with commercial financing. Commercial loans can range from a few thousand dollars to hundreds of millions, depending on your needs and qualifications.
Commercial loans also offer more flexibility in terms of repayment structures, collateral options, and use of funds. You’re not limited to specific purchase categories like you might be with certain personal loans.
What types of commercial loans are available?
The commercial lending landscape has really expanded in recent years. Here’s a non-exhaustive list of what’s available:
- Term loans – Fixed amount, regular payments, perfect for equipment or expansion
- Lines of credit – Flexible access to funds as needed
- SBA loans – Government-backed financing with favorable terms
- Equipment financing – Specifically for machinery, vehicles, or technology
- Commercial real estate loans – For purchasing or refinancing property
- Bridge loans – Short-term financing to “bridge” gaps between transactions
- Construction loans – For ground-up development or major renovations
- Factoring or accounts receivable (AR) financing – Convert outstanding invoices to immediate cash
- USDA business loans – Rural development financing with attractive rates
- Merchant cash advances (MCAs) – Quick funding based on future credit card sales
The key is matching the right type of financing to your specific situation. A restaurant needing working capital has very different needs than a real estate developer acquiring land for a new project.
How much can I borrow with a commercial loan?
The borrowing range for commercial loans is absolutely massive – from as little as $5,000 to hundreds of millions of dollars.
Small business loans might start around $5,000-$10,000 for working capital or equipment purchases. These are often unsecured or require minimal collateral.
Mid-market financing typically ranges from $100,000 to $5 million, covering most business expansion needs, real estate acquisitions, or major equipment purchases.
Large commercial deals can reach $100 million, or even higher for major real estate developments, acquisitions, or corporate financing.
The amount you can borrow depends on several factors:
- Your business revenue and cash flow
- Available collateral
- The specific loan program
- Your creditworthiness
- The lender’s size and capabilities
What’s interesting is that different lenders have different “sweet spots”. Some lenders love $50,000 deals, while others don’t won’t call back until you’re talking about $25 million or more. This is another area where working with a broker helps immensely. We know which lenders are the right fit for your loan size.
What are the current interest rates for commercial loans?
Interest rates in 2025 are… well, let’s just say they’re not what they were a few years ago. Most commercial loans range from 6% to 12%, but that’s just the starting point.
Here’s what you need to know: rates can go significantly higher than 12% for certain products designed for high-risk borrowers. If you’re looking at alternative financing options like MCAs or hard money loans, you might see rates in the teens or even higher.
Several factors influence your rate:
- Loan type – Conventional or bank loans typically offer the lowest rates, while bridge loans or MCAs cost more
- Your creditworthiness – Both business and personal credit scores matter
- Collateral – Strong collateral can help secure better rates
- Market conditions – Federal Reserve policy and economic factors play a role
The good news? There’s still competitive pricing available if you know where to look and can present a strong application. That’s where working with experienced professionals makes a real difference.
What is the typical loan term for a commercial loan?
Commercial loan terms are incredibly flexible, ranging from as short as 1 year to as long as 30 years, depending on what you’re financing and your business needs.
Short-term financing (1-3 years) is common for working capital, inventory purchases, or bridge loans. These are designed to address immediate cash flow needs or temporary financing gaps.
Medium-term loans (3-10 years) work well for equipment purchases, business expansions, or refinancing existing debt. The payments are manageable while still paying off the loan in a reasonable timeframe.
Long-term financing (10-30 years) is typically used for commercial real estate purchases or major facility improvements. The longer terms keep payments lower, which is crucial for real estate investments where cash flow matters.
SBA loans often offer some of the longest terms available, which is one reason they’re so popular among business owners who want to minimize their monthly payment obligations.
The trick is matching the loan term to your business strategy. If you’re planning to sell a property in five years, you probably don’t need a 20-year loan. But if you’re buying your forever business location, longer terms might make perfect sense.
Conclusion
There you have it. The fundamental questions we hear every day from business owners exploring commercial financing. But here’s what we know after years in this business: these FAQs are just scratching the surface.
Your situation is unique. Your business has its own story, challenges, and opportunities. The questions covered here give you a solid foundation, but you probably have specific concerns about your industry, your credit situation, or your particular financing needs.
That’s where our team of commercial lending specialists comes in.
We don’t just answer questions. We help you navigate the entire process. From understanding which loan products fit your needs to connecting you with the right lenders who actually want to fund deals like yours.
And here’s the best part: we offer free consultations. No obligation. No high-pressure sales tactics. Just an honest conversation about your financing needs and how we can help you achieve your business goals.
Got questions that weren’t covered here? Perfect. That’s exactly why we’re here.
Ready to explore your commercial financing options? Let’s talk. Our team is standing by to help you find the right solution for your business. Because at the end of the day, getting the right financing shouldn’t feel like solving a complex puzzle.
It should feel like having an experienced guide who knows exactly where you’re trying to go.