We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Are the Different Types of Commercial Bank Loans?

By Alex Newth
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Commercial bank loans are those loans made by banks to established businesses and industries, as well as those businesses that are just getting started. Among the many types of commercial bank loans are start-up loans, which give new businesses enough money for costs such as buying property and equipment and hiring necessary staff. Equipment loans are made to purchase expensive equipment, with the equipment serving as collateral in case the business default on the loan. Demand loans are paid to debtors, whether private citizens or businesses, in one payment and paid back in installments. Term loans are paid in installments, sometimes every week or once a month, and they last several years.

Starting a business requires money. A soon-to-be business owner usually needs to purchase equipment, business space, inventory and supplies. While some people may have funds available, many do not, which leads them to seek start-up commercial bank loans. The business often serves as collateral if the business owner defaults, and the bank may require the business owner to have cost estimates so the bank loans the proper amount of money.

Expensive equipment may be necessary for a business, but it can be hard to pay for. With this in mind, equipment commercial bank loans typically pay for expensive pieces of equipment, such as construction equipment. While a bank may give out loans for inexpensive equipment, such as a computer, this is uncommon because the bank will typically not gain much on the loan. The equipment serves as collateral with this type of loan, however, and it may be confiscated if the person defaults on the loan payment.

Demand commercial bank loans are among the most common loans. These can be used for many purposes, including buying items and just to have extra money on hand, and the money is paid to the debtor in full in one payment. After the debtor receives the money, he or she is put on a payment plan and must repay the money in installments. If the debtor defaults, then he or she typically is expected to pay back the full amount of the loan immediately.

A business may take out a term commercial bank loan, which is paid to the debtor in installments, usually every month. These loans typically last three years or longer and are usually used by businesses to finance operations. During this time, the bank will initiate a monthly repayment schedule. Since the monthly repayments are less each month than the amount of money the debtor is receiving, it typically takes several years after the loan is complete for the debtor to completely repay the debt.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Discussion Comments

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.