Every company aims to grow and reach higher levels of success. To do this, they often need financial resources to
fund their expansion, and one common way to get this money is through commercial and business loans. Commercial and
Business loans provide the necessary financial support to help businesses invest in new projects, enter new markets,
manage working capital etc. Let’s understand how these loans can fuel your business's next big step!
What is a Commercial Loan?
A Commercial Loan is a debt-based financial agreement between a business and a financial institution. It is typically
availed by larger corporations or businesses with substantial revenue streams. The core purpose of a Commercial Loan
is to fund major capital expenditures or operational costs that a business may not be able to afford otherwise.
These loans are often secured against business assets and have a set repayment schedule.
What is a Business Loan?
A Business Loan is a more
general term that encompasses any type of loan aimed at funding business operations. This can include startup costs,
expansions, inventory purchases, or any other business-related expense. Business Loans are available to businesses
of all sizes, and the terms can vary widely depending on the type of business, creditworthiness, and the purpose of
the loan.
Difference between Commercial and Business Loans
The main difference between Business Loans and Commercial Loans is what they're used for, how easy they are to get,
and what you need to qualify for.
Loan purpose: Commercial Loans are for big projects like buying new buildings or expanding your business,
which require huge funds. Business Loans can help pay for everyday costs or smaller projects, making them good for
both short-term needs and long-term plans.
Eligibility criteria: Eligibility criteria for Commercial Loans are stricter and provided to large businesses
with proven track record. On the other hand, business Loans are available for a variety of businesses, even new ones
or small businesses that don't have a lot of assets or a long history of making money.
Collateral: For Commercial Loans, business property or machinery & equipment need to be put as collateral.
If a company is not able to pay back the loan, the bank might take this as payment. Business Loans are more
flexible. You might not need to offer security, especially if you have a good credit score or if the loan isn't for
a huge amount.
Features and purpose of Commercial and Business Loans
Understanding the Commercial Loan vs Business Loan highlights their unique features.
Commercial loans are designed for substantial, long-term investments, like acquiring new properties or extensive
expansion, focusing on businesses with strong financial backgrounds and significant assets for collateral.
This contrasts with Business Loans, which offer a broader spectrum of support for both operational costs and
smaller-scale investments, making them accessible to businesses of various sizes, including startups.
Also Read: How
to get a Startup Business Loan in 5 easy steps?
Conclusion
Understanding what is the difference between Business Loans and Commercial Loans is crucial to aligning your loan
choice with your business needs and capabilities and is key to fostering sustainable growth and success.
Axis Bank's Business Loans offer a lifeline for the self-employed, with loan amounts starting from as low as ₹50,000
and extending up to ₹75 lakh. With the possibility of spreading repayments over 6 to 60 months, these loans provide
the financial flexibility required to steer your business towards its next growth phase without the need for any
collateral.
Disclaimer: This article is for information purpose only. The views expressed in this article
are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd.
and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader
for taking any financial decisions based on the contents and information. Please consult your financial advisor
before making any financial decision.
