Commercial Loan Details

     Commercial loans refer to a relatively rare type of bank lending. Only widely available on a secured basis or to large, ‘creditworthy’ Fortune 1000 companies, (where they are dressed up and called ‘commercial credit facilities’ and other similar names) a commercial loan is essentially a loan by a bank or financial institution to a business, large or small, though larger businesses certainly receive far more of these loans. Most banks place loans to larger and mid market businesses in the commercial category, preferring to categorize small businesses as businesses which meet the requirements to obtain a Small Business Administration guaranteed product. Using that dividing line, commercial loans are generally made to larger businesses with revenues in excess of $10 million and generally involve full or partial amortization, a fixed repayment term, and limited collateral or security requirements (loans are frequently collateralized by ‘accounts receivable’ or other intangible assets. Commercial loans are also frequently the bread and butter of the leveraged buyout and the hostile takeover as banks provide the capital to good managers in their attempts to lever takeovers of less efficient (generally less well managed firms).