Commercial Loans: A Step-by-Step Guide

Last updated May 27, 2025

Whether you’re looking to purchase equipment or vehicles, cover everyday expenses, or buy property for your business, a commercial loan can make that possible.

You have many

business loan

options available to you when it comes to commercial funding. We’ll cover these in our guide below and prepare you for the application process.

And once you feel ready to find a commercial loan that’s right for your business…we can help with that, too.

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Step 1: Determine why you need a loan.

Getting clear about exactly why you need a commercial loan—and for precisely what amount—is essential not only to keep your business on track and on budget but also because most lenders will ask you this outright in the application process. The clearer you can be about the purpose of your commercial loan, the more likely a lender is to consider your application.

Here are several common reasons business owners get a commercial loan:

Cover unexpected expenses. Commercial loans come in handy when something comes up and you need to handle it right away, whether an unexpected opportunity or an emergency situation. (You may want to check out our list of the best emergency business loans).
Stabilize cash flow. This is a common scenario, particularly among seasonal businesses. A commercial loan can help you prepare for the busy season with additional capital to buy inventory and hire more staff, or it can provide extra capital during the slow season so you can keep up with your regular expenses.
Grow a startup. Starting a business costs money, and there are more expenses than you’d think. If you’re in this boat, your options are often limited, but you may be able to get a commercial loan from an online lender. (If not, check out our list of a dozen other options you have to access startup funding.)
Expand an established business. Many established business owners need financing to bring their business to the next level. A commercial loan can help you buy a major piece of equipment or launch an entirely new product line. It can also help you acquire another business, open a new location, or renovate an existing one.

Step 2: Decide which loan type is right for your business.

Next, you need to decide which loan type is best for your business. Here are some of the most popular commercial business loan solutions you may consider.

Term Loan

business term loan

is probably the first thing you think of when you envision a commercial loan. It’s a lump sum loan that borrowers pay back over a set period of time, with fixed payments. Generally, term loans are broken up into three categories:

Long-term loans are the hardest of the three to qualify for, offering large amounts, long terms (five or more years), and low rates.
Medium-term loans are slightly easier to qualify for than long-term loans, have shorter terms (between two and five years), and offer smaller amounts of financing.
Short-term loans are loans with terms less than two years and are the easiest term loans to qualify for. These loans are often more accessible for startups or businesses with bad credit, but they also tend to have higher interest rates.

Business Line of Credit

If you’re looking for a flexible financing option to meet many different needs, then a

business line of credit

could be the right commercial financing option for you.

With a line of credit, you get approved for a set amount that you have access to whenever you want or need capital for your business. Your credit line can remain in your back pocket, until you make the decision you need capital. You can draw up to your maximum credit line, and once you’ve repaid the amount you drew (plus interest), your line of credit gets refilled to its original amount.

The best part? You only pay interest on the amount you draw. Because a line of credit is such a flexible financing option—allowing you to use it whenever you want, without having to pay interest on the full funds—it’s a great option for covering

working capital

needs or dealing with sluggish cash flow.

SBA Loan

SBA loans

are some of the most desirable small business loans on the market. They’re loans that are provided by traditional and online lenders and guaranteed by the SBA. This means that the government backs up to 90% of the loan, effectively removing a lot of the risk a lender takes in lending to a small business owner.

An SBA loan is not easy to qualify for, though. The low rates, large amounts, and long terms that come with an SBA loan mean the requirements are steep. You’ll generally need a credit score of 690 or higher, strong annual revenue, and at least two years in business to qualify.

If you are able to score an SBA loan, they work well for the same purposes as a traditional term loan does: for major business expansions, acquisitions, or day-to-day working capital needs.

Equipment Financing

Equipment loans, also called

equipment financing

, help you afford the high price tag that comes along with new business equipment and machinery.

Equipment loans can provide you with as much as 100% of the value of your new or used equipment, which you’ll pay back over a set repayment period, plus interest. Once you pay the equipment loan off, you own the equipment. Another appealing aspect of this type of financing is that the equipment itself serves as the collateral on the loan, so you don’t typically need to provide additional collateral.

Equipment financing works well for purchasing machinery, tools, vehicles, and even office furniture or software.

Invoice Financing

Invoice financing

helps you free up cash that’s held up in your unpaid invoices. An invoice financing company advances you a large percentage of the value of your outstanding invoice, holding a small percentage of the invoice (usually between 10% to 15%) in reserve.

The company charges you a fee of typically 1% to 5% of the invoice value each week it takes your customer to pay. Once the customer pays, you repay the financing company, including the fees.

Invoice financing is primarily a solution for B2B borrowers who invoice customers.

Commercial Real Estate Loan

Commercial real estate loans provide financing specifically to acquire or renovate commercial real estate. Also called

business mortgage loans

or commercial mortgage loans, these are large, long-term loans that come with comparatively low interest rates.

SBA loans can be a good fit for commercial real estate—CDC/504 loans and 7(a) loans can both be used for commercial real estate needs.

The process for getting a commercial real estate loan is generally similar to getting any type of commercial loan—however, you will have additional steps related to finding, purchasing, and appraising the property you’re looking to buy.

Step 3: Evaluate your commercial loan qualifications.

Once you’ve determined the type of commercial loan that’s right for your financing needs, you’ll want to check that you meet the

business loan qualification requirements

. These will vary based on the type of loan and the lender.

Let’s break down the three most common commercial loan requirements that lenders will use to evaluate your business.

Credit Score

Your personal credit score is a measure of your reliability with your finances. If you have a history of paying your personal debt on time and in full, then the lender has reason to believe that you’ll pay your commercial loan debt on time and in full. A poor credit history, on the other hand, doesn’t give the lender confidence that they’ll end up getting their money back in the long run.

So before you go out to get a commercial loan, request your credit report from annualcreditreport.com—you’re entitled to a free one every year.

If your score is 690 or above , you’ll have many commercial loan options available to you, including bank loans, SBA loans and medium-term loans.

If your score is below 690 , you’re unlikely to qualify for the most affordable types of commercial loans. You may have luck qualifying for short-term loans, shorter-term lines of credit, invoice financing, and equipment financing.

Time in Business

As you can imagine, the more years you’ve been in business, the better. With more experience running a business, the lender can be confident that you’ll continue to run your business.

With this reasoning, you’ll have an easier time getting a commercial loan if you’ve been in business for at least two years. A business that’s been operating for less than two years will likely need to look at short-term loans and lines of credit.

Annual Revenue

A lender wants to see that you’re bringing in enough revenue to comfortably sustain your monthly, weekly, or daily loan repayments. Minimum annual revenue requirements typically range from $50,000 to $250,000.

Step 4: Prepare your application.

This step is the most tedious one and will require adequate time to gather all of your documents and information, check them for accuracy, and ensure they’re up to date. Rushing through this step could lead to errors and inaccuracies that may result in significant delays in processing your commercial loan, or even an outright denial of your application.

As with qualification requirements, the documentation you’ll need to supply with your application will vary by loan product and lender. In general, though, you can expect to provide many or all of the following with your commercial loan application:

Business and personal bank statements
Business tax ID
Business and personal tax returns
Business debt schedule
Business financial statements, such as profit and loss statement and balance sheet
Business legal documents (e.g., articles of incorporation, business licenses and permits, proof of ownership, commercial lease, franchising agreement)
Use of loan statement
Business plan
Personal resume and experience

For more information on required documents, refer to our

commercial loan documentation checklist

Step 5: Close your loan.

After you’ve gathered the necessary documents and submitted your application, you’ll be waiting on a decision. With an online loan, you typically can be approved within a few days or even hours, whereas bank and SBA loans require longer timelines (weeks to months).

Once you’ve been approved, the final step is closing on your commercial loan. During the closing process, make sure you review the business loan agreement thoroughly, ask any questions you have, and perhaps even review the document with a financial advisor or business attorney.

Fundera Can Help

We’re here to take some of the work of finding a commercial loan off your plate.

Answer a few questions—with no impact to your credit score and free of obligation—to see which commercial loans you qualify for. We’ll advise you through the entire loan process, from comparing options to signing your agreement.

Let’s get you funded!