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Financing Solutions & The Commercial Lending Process

Submitted by, Devin Patel, MBA, 

finance blog

Starting or growing a business can be a daunting task. There are many challenges to face, from marketing and sales to hiring and managing employees. One of the most critical aspects of growing a business is having access to financing. However, traditional financing solutions may not always be the best for all businesses as every financing scenario is unique and is best served with a tailored financing solution.

Fortunately, there are many tailored financing solutions available at every step in your business’ growth cycle, you can customize financing to meet your specific needs by reaching out to your financial lender for advice and expertise. Here are some of the options available to business owners.

  1. Asset Secured Senior Term Debt: These are the most common type of commercial loan. They involve borrowing a specific amount of time and repaying it over a predetermined period with interest. Term loans are used for various purposes such as acquiring assets, financing expansion projects, or consolidating debt.
  2. Cash Flow Senior Term Debt: Is a type of unsecured borrowing that Is used for day to day operations of a small business. The loan is used to finance working capital, inventory, payroll, shareholder buyout, leveraged buyout, etc. and is repaid with cash flow from the business. Cash flow loans are typically sought by established businesses with a track record of profitability as they typically command higher interest rates to compensate for greater repayment risk.
  3. Subordinated and Mezzanine Debt: Is a type of debt that ranks lower in priority compared to other debts in the event of the Borrower’s default of bankruptcy. For businesses, subordinated debt can be an attractive option to raise capital because it allows them to maintain a higher level of senior debt that may have more favourable terms and conditions. It can be used as a way to raise additional funds without diluting the ownership of existing shareholders. This loan is typically unsecured or partially secured and is mainly utilized by well established businesses with a track record of profitability.
  4. Equity: Is when individuals or institutional investors purchase equity in a company, they become shareholders and are considered partial owners of the business. Equity investments play crucial role in the market as it allows companies to raise capital for growth and expansion while offering investors an opportunity to participate in the success and profits of the business. They carry a higher level of risk compared to debt investments and are typically utilized by well established businesses with a track record of profitability.

Commercial lending plays a crucial role in fueling economic growth and supporting business expansion. Whether you’re an entrepreneur looking to start a new venture or an established business owner seeking to expand operations, understanding the fundamentals of commercial lending is essential. Here is the typical commercial lending process.


  1. Preparing the Application: Start by gathering all the necessary financial documents, such as tax returns, financial statements, business plans, cash flow projects, etc. Lenders will evaluate these documents to assess your business’s credit worthiness, repayment capacity, and understand your goals.
  2. Choosing the Right Lender: Research and compare different lenders based on their expertise, reputation, and loan terms. Traditional banks, credit unions, online lenders, and specialized commercial lenders are all potential options.
  3. Due Diligence & Proposal: Once a lender has completed their preliminary due diligence and evaluated your application they will determine if a proposal will be issued. The proposal will outline the terms, conditions, lending program, fees, interest rate, etc. which you can either accept or decline.
  4. Underwriting: Once the proposal has been accepted lenders will prepare and underwrite a loan application outlining the credit worthiness of the business, discuss the risks and mitigants associated with the loan and analyze factors such as credit history, financial stability, industry trends, collateral, and business plans.
  5. Loan Approval: If approved, the lender will provide a loan offer that outlines terms and conditions like the initial proposal. Review the terms carefully and ask any questions or clarifications if necessary.
  6. Loan Disbursement and Repayment: After accepting the loan offer, the lender will contact yours and their lawyers to review the agreed upon terms and completed a security package with their opinion to ensure due diligence and security is completed. The lender will then disburse the funds according to the agreed upon terms. Make sure to adhere to the repayment schedule, including timely payments of principal and interest.

In conclusion, there are many tailored financing solutions available to help businesses grow. From asset secured senior term loans to equity investments, businesses have a variety of options to choose from. By exploring these options and finding the right fit for their business, entrepreneurs and established business owners can access the funds they need to achieve their goals.

Visit our website to learn more about commercial lending and financing solutions available.

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