Commercial Finance Companies: The Best Options

Before we dive headfirst into the list of the different commercial financing companies on the market, let’s set down some context.

Why types of business loans could you qualify for?

These days, there’s more than just one type of business loan. And it’s important to know what you’re looking for in a loan before you go out and pursue a business financing company that doesn’t provide the right solution for your business.

Here’s a quick overview of the various types of business loans on the market.

SBA loans are considered the gold standard of small business financing.

These are loans that are actually issued by traditional banks (and other SBA lenders, too) but guaranteed by the Small Business Administration.

The most popular type of SBA loan, the 7(a) loan, offers long terms (think 10 years), low rates (think sub 10%), and large amounts (up to $5 million).

Loans from the 7(a) program are very general financing products, so they’re perfect for just about any major business need.

However, these are some of the harder loans to qualify for—only borrowers with established businesses, strong revenues, and stellar personal credit tend to qualify.

Traditional term loans are probably the business loans you’re most familiar with: They’re lump-sum loans that are repaid over a set period of time with regular payments.

The larger term loans out there are really only offered by traditional banks, and they’re extremely difficult to qualify for.

However, non-bank, alternative commercial finance companies have entered the space to offer what we refer to as “medium-term loans.” These are like traditional bank loans, but slightly smaller (think up to $1 million, but averaging much less), shorter-term (up to five years), and slightly higher rates (ranging from 6.5% to 30%).

These loans are easier to qualify for than bank loans or SBA loans and are good for large business investments or expenses.

Short-term loans are like their medium-term counterpart, but shorter.

Non-bank, online commercial finance companies offer these lump-sum loans over short terms (think three to 18 months), with smaller amounts (a maximum of $250,000), and higher rates (ranging from 10% to 90%).

You’ll get higher interest rates with a short-term loan product because these commercial financing companies offer much more accessible and fast financing than you can find with other lenders. Put simply, they work with riskier borrowers and charge higher interest rates because of it.

Short-term loans can be the infusion of capital you need to accomplish short-term projects, meet your working capital needs, or handle just about any other one-off expenses.

A business line of credit is a financing solution that gives you access to a pool of funds for your business to draw from whenever you need it. Much like a business credit card, you only pay interest on the funds you draw, and once you pay them back, your line of credit resets to its original amount.

Commercial finance companies offer both large and small lines of credit, with varying accessibility.

These loans are some of the best financing products out there for small business owners in part because they’re so flexible. In particular, business lines of credit work well for business owners needing to cover regular expenses, smooth out cash flow, or just to have as a safety net in their back pocket.

Invoice financing helps business owners who invoice their customers but need cash sooner than their invoices are being paid.

Invoice financing helps you get the cash you’re owed from your outstanding invoices. With invoice financing, you can be advanced typically up to 85% of the invoice amount. The commercial financing company will hold the remaining 15% in reserve, charging fees each week it takes your customer to pay up. Once they do pay, the commercial finance company gets repaid, and they return the reserve amount to you, less their fees.

If your business has outstanding invoices, this financing option could be a particularly good fit for you.

Equipment financing helps you afford the pricey equipment you need for your business, but can’t pay for upfront.

The commercial finance companies that provide equipment financing advance you up to 100% of the value of the equipment, which you’ll pay back over a set amount of time with interest. Once you’ve fully paid up, you own the equipment yourself.

Equipment financing is a good option for businesses that need new (or used) machinery, vehicles, office supplies, and so on. Additionally, the equipment itself acts as collateral.

A short-term form of business funding, the merchant cash advance is a financing solution for merchants who process credit and debit card transactions.

In this type of financing, a merchant cash advance company advances you a lump sum loan. They’ll collect repayment by taking a fixed percentage of money from your daily credit and debit card sales. They’ll keep taking from your credit card sales until they’ve collected the amount they advanced you, plus interest.

While this merchant financing is the most accessible and fastest funding method on the market, it’s also the most expensive financing option out there.

When you’re searching for commercial finance companies, you’ll come across an array of alternative lenders. And different borrowers will align with different types of business finance companies depending on their qualifications.

Banks offer the term loans and lines of credit that you likely know well. Those loans are usually long-term, for large amounts, with very low rates. However, financing from traditional banks is extremely hard to qualify for. Just about 20% of business owners who apply to traditional banks actually get approved.

And because banks have such tight credit requirements for small business owners, alternative lenders—also commercial finance companies—have stepped in during the last 10 years to fund borrowers who don’t qualify for bank loans with the products we listed above.

These two types of commercial finance companies (banks versus alternative lenders) are different than one another in a few important ways.

Here are the most important differences to know.

Now that we know the types of loans these commercial finance companies are offering, it only makes sense to go over where you can find this funding. It’s important to note that this list doesn’t include traditional banks.

If you’re a qualified borrower—meaning you have a stellar personal credit score, at least two years in business (although more is better), and strong business financials—then a bank will likely be the lender to work with.

However, if a bank isn’t a fit for you just yet, then it could make sense to pursue an alternative lender.

If that’s the case, here’s a list of the best commercial finance companies out there, organized by loan type.

If you’re interested in medium-term loans, there are a couple of commercial finance companies that could perfectly meet your needs.

If you can’t qualify for the top medium-term loans from those commercial finance companies, then a short-term loan could be a better fit for you.

Here are the top short-term commercial finance companies on the market.

Business lines of credit are great options for business owners who need flexibility in their financing.

Here is one of the top line of credit lenders.

If invoice financing can help you meet your funding needs, here are the best invoice factoring companies to work with.

Now that you have the list of the top commercial finance companies out there, you can work on deciding which one to go with.

Once you know what types of financing you might qualify for, you can get a sense of which commercial finance companies will be realistic options for your business. From there you should choose the lender that will best meet your financing needs at the lowest cost possible.

Working with an online marketplace like Fundera can streamline the process so you can see all of your business loan options with just one application. Plus, Fundera’s loan specialists will walk you through the process and help you choose the best product for your business. The best part is—it’s free.