Commercial financing
Commercial finance is the phenomenon in which loans are offered to businesses. Commercial finance is usually offered by a bank or other sources such as lenders. Commercial finance is offered by commercial banks and the loans are secured on the basis of business assets. Assets used to sanction commercial finance loans are, receivables from invoices, equipment or supplies and real estate.
Loans are generally easier to sanction to large and well established companies whereas the smaller businesses can incur a loan from the Small Business Administration or the SBA. The SBA itself may provide the commercial loan or seek another lender who is willing to take the risk to finance small businesses.
Commercial lenders
Commercial lenders offer commercial financing to businesses that are backed by hard collateral. Collateral is the term used to indicate those assets that are owned by the borrower and are fortified to the lender in case the borrower is unable to pay back the lender. Real estate is considered as the most important collateral when the lender is making a deal with the borrower. But it is not the only collateral considered but even factoring, non-conforming assets and other sources are taken into consideration. Commercial lending practices are carried out in different ways. There are different financial groups such as commercial banks, private lending
institutions, hard money lenders and other financial groups. The lenders have different standards according to which they base their loan criteria and consider the most eligible borrowers. They focus mainly on the private market and strive to grant less rigid financial qualifications than most of the banks.
Commercial lenders look for borrowers who are able to pay back quickly and therefore they specialize in bridge loans and hard money where the recovery period is less than two weeks. The GE Commercial Finance is one of the six main operating divisions of General Electric, headquartered in Norwalk, Connecticut in USA. It is involved in commercial financing in over thirty five countries and owns assets worth over US$232 billion. The GE Commercial Finance was a part of the GE Capital. Eventually the GE Capital split into various divisions and the GE Commercial Finance is one of the many parts. These divisions now work independently but are still referred collectively as GE Capital. The General Electric still gets its major revenues from the GE capital. The General Electric now is able to reach out to various businesses to provide financing through GE capital. The industries that are financed by GE include healthcare, fleet management, manufacturing, communication, construction, aviation and many others. These industries are responsible to be GEs biggest growth engines. The GE is also responsible for offering products like revolving lines of credit, real estate and car fleet management.
A commercial bank acts as a financial intermediary, financial intermediary is an institution or a firm that intermediates or negotiates among two parties namely the commercial financer and the borrower. A bank does not have to be necessarily concerned with capital market activities only it can even house commercial banks. These two types of banking processes can work under the same ownership but have their independent compartments within the bank. Commercial bank is the term used to refer to a bank or a division of a bank which is responsible of providing commercial finance to large businesses.
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