Have you ever purchased a car? Bought a house or simply needed quick cash? There are so many factors to consider such mileage on a car, market value on some property, repairs needed on a house and much more. While people spend so much time on the actual purchase, they tend to put the factors of obtaining a loan under the radar. The majority of people in the United States do not use their saving for large purchases; they use other people money. Although all of the other factors are very important; let’s discuss the considerations of obtaining a short-term commercial loan.
What is a commercial loan? Fundamentals of Financial Management states that a commercial loan is an unsecured short-term promissory note of large firms usually issued in denominations of $100,000 or more and have an interest rate somewhat below the prime rate (Brigham& Houston p.527). Short-term is a time span less than one year. No matter if the loan is 364 days it is considered short-term, however, if it so much as go beyond 366 days it is considered long-term. Commercial loans are used to meet businesses short-term financial needs. Short-term commercial loans are generally issued by other business firms, insurance companies, pension funds money market mutual funds and banks. They issue commercial loans most often because they are the main institutions that need large amounts of funds and tend to have great credit ratings and good reputation with securing debt. Commercial loans habitually consist of one of most national banks. When dealing with working capital, loans are temporary to take care of capital needs. At the end of the loan cycle which will be a year or less the full content of the loan will be repaid and depending on the contract, interest will be accumulated in the dura ...