Compared to a personal loan, a commercial loan requires much more paperwork. A commercial loans also require a certain amount of know how of how commercial loans work before an organisation can procure a commercial loan. To begin with, a commercial loan (as the name suggests) is a loan given to small businesses, or commercial organizations so the organizations can meet various operational and infrastructure expenses. In sharp contrast to a personal loan, commercial loans usually require an asset of ?suitable value? to be put down as collateral to procure the loan.

Since the loan amount involved is much higher (when compared to a personal loan), commercial loans usually take longer to be approved and are also subject to the scrutiny of more than one individual. In fact, it is not uncommon for commercial loans to be rejected due to the lack of paperwork or because the collateral being offered was not proportionate to the loan amount. Before we discuss what an organization can do to increase the chance of their commercial loan being approved, it is vital to understand how a commercial loan works.

Once a commercial organization or small business submit a loan proposal, the bank or loan organization assigns a loan officer to look into the loan application. The loan officer thoroughly scrutinizes the loan application, does a background check on the company, and may require more paperwork if he is not satisfied with the paperwork he has received. The loan officer then passes on his findings/recommendations to a loan committee or an underwriter. In rare cases, a loan application can first go to a loan officer then to an underwriter and finally reach the loan committee. However, it is the loan officer that decides if the loan is feasible and if there is any collateral required. The loan committee simply reviews the findings and gives finally authorization.

Once a ?case? reaches the loan committee, the loan committee usually presents the loan applicant with a letter of intent. The letter of intent clearly mentions the details of the loans and the terms and conditions, so that the lending organization and the loan applicant understand each other. Being presented with a letter of intent does not mean the loan will be approved; all it means is that the loan has reached the loan committee. Only when the loan committee finalizes the loan, is the loan applicant required to sign a contract or loan agreement.

The loan agreement is an exhaustive document and it has every single detail of the loan like the collateral the loan applicant is willing to put up, the APR (interest rate), and the duration of the loan mentioned in black and white. In essence the most important link in the chain is not the loan committee; it's the loan officer. The findings of the loan officer are usually considered beyond reproach and an underwriter or loan committee simply determine if the loan is feasible. If the loan officer does not find the loan feasible the loan will never reach the loan committee at all.

What you can do to improve the chance of your commercial loan being approved

If you are not sure what you need to do to apply for a commercial loan, don't worry. You can always hire a professional firm that deals in commercial loans. Professional firms have years of experience in dealing with commercial loans, and would probably have dealt with a commercial loan like yours before. In fact, chances are the firm you have hired for your commercial loan would have already worked with the same loan officer that is handling your application. Hiring a professional firm also increases the chances of your loan being approved, as a loan firm will know exactly what paperwork you require, and will be willing to make every effort to get your commercial loan approved. By and large hiring a professional firm to take care of your loan application is a good idea.