Three factors to use in comparison shopping for a commercial loan are the type of loan, the term length and the overall cost, advises NerdWallet. These factors help identify the loan that best meets the specific needs of the business and its ability to repay.
The business should consider the nature of different types of financing when deciding which is most appropriate, notes NerdWallet. For example, a line of credit is good for a business that makes purchases on a recurring basis, as this allows the business to borrow money as needed without paying unnecessary interest. Accounts receivable financing works well for a business that invoices its customers, because it allows the business to have cash on hand while awaiting payment. For large one-time purchases, a term loan is best because it gives the business more time to repay a large debt.
Additionally, the business must calculate the amount of the loan, including interest, along with the length of the loan term, states NerdWallet. Annual percentage rates frequently vary according to the length of the repayment period, so a lower APR does not necessarily mean less overall money paid. Again, the needs of the business determine whether a short-term or long-term loan is more appropriate.