Commercial Loans Firms seeking funds in private lending essentially compete with one another.
Lenders scrutinize the risk and potential rate of return each deal offers.
Based on this assessment, companies gain or are denied access to capital. The cost of capital will be lower to those with lower risk and higher return, while more expensive capital, or none at all, will go to those with higher risk and uncertain return. The majority of commercial loans made to industrial companies are used to purchase inventory goods or raw materials, and typically the term on them is for one year or less. These are also known as working capital loans. These are typically secured by accounts receivable or the materials they acquire.