Exploring the Attributes of Commercial Loan Definition

What is a Commercial Loan?

The loan provisions are one of the most unavoidable options in times of economic crisis where no other alternative seems to work for commercial organizations. There are various types of loans provided to the business institutions that vary in nature in terms of the duration of repayment, the nature of the loan etc. But most important of them that is worth mentioning is the commercial loans.

Before venturing further into the different features of the commercial loans, it is very important to get a proper explicit concept about the commercial loan definition. The commercial loans are also known as the business loans. Commercial loan is the official process of borrowing finances from any recognized institution from the banking industry. These loans are generally provided on the short term basis ranging between periods of 30 days to 1 year as the case may be.

Requisites for Commercial Loan Application Submission

As part of the formalities the commercial organization approaching the commercial banks needs to furnish certain documents along with their loan application. However it is important to mention that the loan application processing system differs from one institution to another and so are the requirements of furnishing documents. The bank authorities will provide the entire set of details regarding their policies and requirements. Here is a list of documents that are usually demanded by all major financial institutions before they pass the loan application.

• Annual Financial Statements of the Company: The Company needs to submit the annual financial statements along with the loan application for reference and verification on which the selection or rejection of the application will be based to a great extent.

• Documents in Support of Company Background: A short bio describing the different whereabouts of the company along with the address proof, names of owners, board of directors, and other concerned people, their background etc. have to be provided.

• Business and Future Project Plans: The documents in support of the successful completion of the previous projects (if the company is an established one) alongside the project plans and future initiatives are needed.

• Income Tax Returns Statements: The income tax records of the previous years, generally from 3 to 5 years.

• Legal Documents: Documents supporting the registration and license authentication of the company. Incorporation articles, third party contracts photocopies, franchise agreements and lease details are also required to be submitted.

Once the screening process is over, most of the bank authorities are likely to go through a detailed discussion with the company authorities before sanctioning the loan. Therefore it is in the best interest to send the person to the bank who can answer the queries properly. Here are some of the most probable topics and questions that the bank authorities may put forth.

• The purpose of the loan application 

• If there is already any other loan taken by the company, its current status and the commercial banking organization from where the money has been borrowed 

• The allocation and utilization of the loan amount 

• The list of probable purchases using the amount and the suppliers 

• Details of the whereabouts of the people in the management authority of the company

Written by: life jr

Life Health | Information, Updated at: 8:02 PM