Sources for Business Lending

The first stop in applying for a business lending should be the bank that already handles your finances. With your current bank, you have the advantage of familiarity: you've established a relationship and shown that you're a reputable business. Banks also usually have slightly better rates for commercial loans than other types of lenders.

The tradeoff is that banks are pickier about who they lend to. They may require more collateral, lower debt to equity ratios, or more proven success than other types of business lending. Often they'll decline commercial loans to companies that have been in business fewer than five years.

There are many other types of business lending. The main distinguishing feature is whether they offer secured or unsecured loans. Secured loans are those that are backed up directly by collateral: real estate, securities, or the equipment the loan is being used to purchase. Unsecured loans are more typically offered by banks, while independent financial organizations are more likely to offer secured loans.