Corporate Lending: Product Types and Where to Find Them

Corporate lending, also known as business lending, refers to the loans, lines of credit and other financial products that are given to companies instead of individuals. The funds from a business loan can be used for working capital; to purchase inventory and supplies; to buy equipment, business vehicles and commercial property among other things.

Banks, online lenders and financial services companies are some of the best options available to borrowers seeking business-related funding.

What is corporate lending?

Corporate lending involves traditional banks, online lenders and other financial institutions offering loans and related products to businesses for business-related purposes.

Lenders offering business loans and other corporate lending products often set eligibility requirements related to years in business, annual revenue and credit score. Loan size, interest rates and loan terms typically depend on the product and the lender.

Funding can be short term with repayment in a few months or long term with payments stretched out over years. Borrowers will often be asked for a personal guarantee or collateral to secure funding for their business.

How are corporate loans used?

While it’s common for lenders to ask about plans for the funds from the loan, the money can typically be used for a wide range of purposes as long as they are related to the borrower's business. This includes using the funding to:

• Purchase real estate.

• Buy or expand a business.

• Purchase equipment, inventory and supplies.

• Provide short- or long-term working capital.

• Improve cash flow.

• Refinancing or consolidating existing debt.

Types of corporate lending

Corporate lending can include a variety of products such as the following:

• Business term loans: Term loans provide a lump sum of cash which you repay over a set period of time.

• SBA loans: SBA loans are partially guaranteed by the U.S. Small Business Administration and offered through partner lenders.

• Business lines of credit: A business line of credit allows you to withdraw cash as needed up to a set limit. Weekly or monthly payments are made on the funds you’ve borrowed.

• Commercial real estate loans: Used to purchase or renovate business properties, commercial real estate loans provide lump sums to be repaid over a set period of time.

• Equipment financing: An equipment financing loan is used to purchase equipment needed to run a business.

• Commercial auto loans: These business auto loans are similar to personal auto loans except the vehicle needs to be used for business purposes.

• Invoice financing: With invoice financing, the lender provides a cash advance based on a percentage of your unpaid customer invoices.

» MORE: Best commercial real estate lenders

Where to find corporate lending

Corporate lending is offered through different sources, but not every lender offers all the products we’ve discussed. Here are some sources of funding:

Traditional banks and credit unions

A traditional bank generally offers the most competitive rates and terms for loans. Banks also tend to offer a variety of lending products including term loans, lines of credit, real estate and auto loans. However, banks often require multiple years in business and excellent credit which can make it difficult for some small businesses to qualify.

Credit unions, which are similar to banks, can also offer corporate lending products such as business term loans, lines of credit, auto loans, equipment and real estate loans.

Small Business Administration

Although not actually a lender, the Small Business Administration guarantees loans from $500 to $5.5 million and works with financial institutions and other organizations that offer SBA loans and lines of credit.

SBA 7(a) loans, SBA 504 loans and SBA microloans are available to eligible borrowers and offer low interest rates and long repayment terms. SBA loans can be a great alternative when a business doesn’t qualify for a traditional bank loan. That said, SBA lenders will often require that you have good credit and a number of years in operation.

Online lenders

Online lenders, including some that aren’t banks but still provide financial services, may be an option for borrowers who don’t qualify for a bank or SBA loan, or who need financing quickly. Business loans, lines of credit, equipment loans, commercial auto loans, invoice financing and other business products can be found with these alternative lenders.

Online lenders may have more flexible requirements, but the interest rates offered won’t typically be as competitive as those with a traditional bank and the repayment period may also be shorter, depending on the lender.

Alternatives to corporate lending

If a corporate lending option isn’t a good fit for your business, there are a few funding alternatives: