First, in order to compare commercial loans to home loans, we must look at what they both are.  A commercial loan is a loan that is given to a business and is used for business costs, such as for inventory, operating costs, and commercial real estate.  On the other hand, a home loan is given to an individual and is used for the purchase of a home.  The main difference, then, between a commercial loan and a home loan is the intention of the loan.  If the loan is not intended for any personal use, it may be considered a commercial loan.

It’s all as easy as that, so now we can all go home.  But wait, not so fast.  What if someone purchases a commercial building and plans to use it as their home as well as their business?  A traditional commercial real estate lender will see someone who lives in a commercial property as high risk and will not approve them; however, private lenders may see their property as an opportunity instead.  A private lender will evaluate and appraise the property and give a loan based on their estimation of the property itself.  Therefore, a person who plans to live on site of their commercial property will want to seek a private commercial real estate investor for their commercial mortgage loan. 

Now, what if someone conducts business from their home but is looking for money for their business?  Here is another tricky one since we are dealing with both the home and the business, right?  Actually, this one is fairly simple.  In the case that a person with a home business is looking for money to help with business expenses, he will want to apply for a small business loan in the form of either a line of credit or a term loan.

First, a line of credit is one that has a lot of flexibility for the borrower because it allows for changing business conditions.  Once a line of credit is established, the borrower can use the available funds as they feel fit.  They will then repay toward the principle balance periodically.  This type of loan is ideal for a home business because whenever the business owner draws from the funds he does not need to wait for approval from the lender each time.

A term loan is also another option for a home business owner.  A term loan is one that is given as a lump sum with a set period of time in which to pay the money back.  Term loans can be given to an individual but are often used for small businesses, including home businesses.  What makes these loans different than personal loans is the purpose for which they are given. 

Overall, there are many reasons why commercial loans and home loans are different entities.  Basically, it has to do with how the banks account for the loans.  With a home loan there are several secondary markets and most of the loans are sold to investors like “Freddie Mac” and, in the long run, will not remain on the banks books.  But with a commercial loan, the banks keep these loans on their books in order to show an asset for their company.