A commercial finance company, also known as a commercial credit company, is a non-bank corporation created for the purpose of making loans to businesses, as opposed to individuals. Commercial finance companies are often subsidiaries of larger companies that are created to assist the parent company in financing sales. The subsidiaries may be wholly owned or not.

Unlike commercial banks that accept customer deposits, commercial finance companies use their own capital and bank lines of credit to make loans.

Commercial finance companies are usually more flexible in approving loans than commercial banks. Generally, their credit criteria is less strict and they usually process application much faster than banks. However, they usually charge higher interest rates than commercial banks.

Types of loans generally offered include: (1) Business term loans, (2) invoice factoring. (3) inventory financing, (4) lines of credit, (5) warehousing lines of credit, (6) SBA loans, (7) equipment financing, (8) insurance premium financing, and (9) accounts receivable financing.

 

Mezzanine Debt

Mezzanine debt is a type of hybrid debt that is subordinate to other debt. It is frequently associated with acquisitions, mergers and buyouts. Mezzanine debt is often long term debt with flexible repayment terms. The loans often provide the lender with warrants or options.

 

Private Money - Private Money Lenders

Private money refers to loans made to individuals, companies, and other entities by non-institutional individuals or private lenders. These loans normally carry higher interest rates than institutional loans made by banks, credit unions, and insurance companies because these institutional lenders generally have more stringent underwriting requirements. Private money lenders generally rely more on the asset value of collateral and less on the credit rating and/or the cash flow or income of the borrower.

 

 

Debt Service Ratio for Business Loans

Credit Enhancement

Vendor Financing-Loans

Equipment Leasing