Picking the loan that works for you

Reports and surveys all seem to say that small business lending is on the decline for April and that going forward owners should consider alternate funding options. That may not be the case according to some sources, and entrepreneurs should be mindful of the kind of loans available to them.

Commercial loans are an appealing option to many small businesses but owners that use physical property as collateral in case something should happen to the company or the loan defaults. Unlike a private mortgage, the collateral here must also be commercial property and because a loan can be requested by an individual or a large party credit processing can get complicated. A business banking specialist can usually answer questions for you during the process and you should pursue these questions so you fully understand what you're getting into.

Non-recourse loans offer business owners the option of putting up collateral but in the event a loan should default the bank can only collect on the property the funds were borrowed against. This protects a business owner and investor to a much greater degree but can be more difficult to secure due to the potential for holders to skip out on the balance, so to speak.

Unsecured loans do not require collateral but in the event of bankruptcy or default, the lending institution is allowed to pursue the signers for the full amount of the balance owed. Interest rates on these loans also tend to be higher due to the lack of collateral. These are the best commercial loan though if a borrower is only looking for a short-term investment.

Availability of loans

The month of April got very mixed reviews from different reviewing institutions. Biz2Credit's small business lending index found small business credit rates were basically stagnant from March to April but that overall the index was down 1 percentage point from last year. Omega Performance on the other hand found that lenders were optimistic about lending futures and were looking to increase small business and commercial loan amounts as well as loosening restrictions on qualification.

Regardless of which source you want to believe, you should consider seeking some sound financial investment advice before picking the kind of loan you think is best and pursuing the application process.

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