Business Loans: Five Commercial Credit Structures
CorporateConnect arranges commercial credit across five structures — senior-secured term loans, revolving lines of credit, SBA 7(a) participation, equipment financing, and asset-based lending — for U.S. mid-market borrowers from $250,000 to $50 million committed.
Commercial Credit Structures
Short answer: Term loans fund one-time needs (acquisition, expansion) and amortize 3–10 years. Revolving LOCs fund working-capital cycles. SBA 7(a) offers government-guaranteed credit up to $5M for qualifying businesses. Equipment financing ties to the asset with 5–7 year amortization. ABL advances off a borrowing base of AR and inventory.
- Term loans: $250K to $50M, 3–10 year amortization, fixed or floating
- Revolving LOC: $100K to $25M, typically SOFR + 200–400 bps
- SBA 7(a): up to $5M with 75–85% government guarantee via SBA 7(a) program
- Equipment financing: 80–100% of cost, 5–7 year amortization
- Asset-based lending: up to 85% of eligible AR + 65% of eligible inventory NOLV
Term Loans vs Revolving Lines of Credit
Zero-click: Term loans are single-draw, amortizing, purpose-specific (acquire, renovate, refinance). Revolving LOCs let you draw, repay and redraw up to the commitment limit for working capital. Using a term loan for working capital or an LOC for a permanent asset is a classic mismatch.
Mismatched financing shows up in monthly cash strain. A retailer who drew $800,000 on a 3-year term loan to fund inventory for a holiday season suddenly has a $24,000 monthly principal obligation in February when sales are slow. The same $800,000 drawn on a revolving LOC would have paid down in Q1 as AR converted. CorporateConnect structures around the use-of-funds, not the borrower's preference for fixed monthly payments.
SBA 7(a) Participation
Zero-click: SBA 7(a) is a bank-originated, SBA-guaranteed loan up to $5M. The SBA guarantees 75–85% of the balance, letting lenders extend credit to businesses that sit just outside conventional underwriting. Terms run up to 10 years for working capital, 25 years for real estate.
Equipment Financing and Asset-Based Lending
Zero-click: Equipment financing is a term loan secured by the equipment itself, typically 80–100% of invoice value. Asset-based lending is a revolver secured by AR and inventory, with availability recalculated weekly or monthly against a borrowing base.
ABL fits businesses with strong receivables books and moderate leverage who need more availability than a traditional cash-flow LOC can support. A $40M-revenue distributor with $12M in AR and $8M in inventory might qualify for a $12M cash-flow LOC or a $14M ABL — the ABL rises with the underlying working capital, the cash-flow line does not.
Loan Product Comparison
Zero-click: Smallest commitments start at $100K (LOC) or $250K (term). Largest reach $50M on middle-market term loans. Pricing spread narrows as commitment grows and leverage declines.
| Product | Loan Size | Term | Rate Structure | Collateral |
|---|---|---|---|---|
| Commercial Term Loan | $250K – $50M | 3–10 years | SOFR + 200–450 bps or fixed via swap | Senior-secured blanket lien |
| Revolving LOC | $100K – $25M | 12–24 months, annually renewed | SOFR + 200–400 bps + unused fee | Blanket lien, sometimes unsecured |
| SBA 7(a) | Up to $5M | Up to 10 yrs (25 for RE) | Prime + 2.25% to Prime + 2.75% | SBA guarantee 75–85% |
| Equipment Financing | $50K – $10M | 5–7 years | Fixed 6.5–10.5% | Equipment title/UCC-1 |
| Asset-Based LOC | $2M – $50M | 2–3 year commitment | SOFR + 250–500 bps | 85% AR + 65% inventory NOLV |
Underwriting Package
Zero-click: Standard underwriting requires 3 years of business tax returns, 3 years of financials, interim financials, AR/AP aging, debt schedule, personal financials on 20%+ owners, and projections. ABL adds a field exam on AR and inventory.
Time-to-close varies by structure: a $2M revolving LOC renewal typically closes in 21–30 days with an existing relationship. A $15M SBA 7(a) commonly runs 60–90 days end-to-end. ABL facilities take 45–75 days because the field exam itself consumes 10–14 days. CorporateConnect runs a weekly pipeline call during active underwriting so the borrower's CFO always has a defensible close date.
Expert Commentary: Jonathan R. Hayes, VP Commercial Treasury Solutions, CTP
"The most common underwriting friction I see is the borrower submitting tax returns instead of reviewed or audited statements. Tax returns are a book that's been optimized for minimum taxable income; the bank needs to see operating cash flow before that optimization. Having reviewed statements ready to submit at loan application shaves 3 to 5 weeks off close timing on any deal above $3M. Worth the annual $12K review fee many times over."
FAQ: Business Loans
What is the difference between a term loan and a line of credit?
What is an SBA 7(a) loan?
What does an ABL advance against?
How is interest priced on commercial term loans?
What documentation do you need to underwrite a commercial loan?
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