Every business experiences moments when additional capital can help maintain momentum—whether it’s covering operating expenses, purchasing equipment, or bridging short term cash flow gaps. Commercial and industrial (C&I) loans provide a structured way to meet these needs. A cornerstone of business banking, these specialized loans help companies support daily operations and expand into new opportunities for greater success.

In this guide, we break down how C&I loans work, the options available, and what to evaluate as you determine which financing approach best supports your growth strategy.

What is a commercial and industrial loan?

A commercial and industrial loan is a type of short-term loan or line of credit issued to a business or corporation that typically features variable interest rates. Commercial and industrial (C&I) loans are business loans and revolving lines of credit designed to help companies meet operational needs such as working capital, equipment purchases, inventory funding, and day-to-day expenses. Unlike commercial real estate loans, C&I loans are not tied to property purchases and are typically secured by business assets such as receivables, inventory, or equipment.

Most C&I loans are secured by collateral, though some lenders offer unsecured options to qualified businesses. Small and mid-size companies often use C&I loans to fund cash flow and expenditure needs because they may not have access to stock or a stock exchange. Commercial and industrial loans are distinct from consumer loans and commercial real estate loans that fund commercial property purchases.

How does a commercial and industrial loan work?

Many established businesses use C&I loans as part of an ongoing financing strategy, drawing on credit as working capital needs evolve with growth, seasonality, or expansion.

Businesses can apply for a commercial and industrial loan through a bank, credit union, Small Business Administration (SBA) lender, or online lender. Most C&I loans generally function like other business loans or lines of credit. Funds must be used for business purposes, such as:

• Purchasing equipment or machinery
• Funding inventory or accounts receivable
• Expanding operations or hiring staff
• Managing seasonal cash flow needs
• Covering short-term gaps in working capital

Lenders may require companies to submit routine financial statements and maintain collateral as part of the agreed-upon loan terms. In addition, companies may also be subject to covenants like a debt service coverage ratio (DSCR). C&I loans can be used at any point during the business’ lifecycle, whether for a one-time need or recurring financing.

Typical commercial and industrial loan eligibility requirements include the following:

• Strong credit history
• A detailed business plan with financial projections and a cash flow forecast
• Sufficient collateral, such as real estate, inventory, accounts receivable, or equipment
• Annual revenue and operating history that reflect the company’s balance sheet, income statement, and cash flow performance
• Length of time in business

Some lenders may also request a personal guarantee, which holds the business owner responsible for repayment if the company cannot meet its obligations. Check with the lender for more details regarding their personal guarantee policies.

Common types of commercial and industrial loans

Businesses can choose from several types of C&I loans depending on their needs. Below are some of the most common options.

Term loans

Term loans consist of a lump sum disbursement that’s repaid over an agreed-upon term. Many companies use term loans to invest in equipment purchases, expansion projects, or other large business expenses.

Lines of credit

C&I lines of credit are ideal for short-term business needs, such as working capital gaps or inventory purchases. Companies have flexible access to funds up to a certain limit. Interest is charged only on the funds used.

Equipment financing

Equipment financing helps businesses get the funds necessary to lease or purchase equipment critical to business operations. The equipment typically serves as the collateral for the loan. Most equipment financing agreements are structured as term loans or leases with set monthly payments.

Working capital loans

Working capital loans provide short-term funding for everyday expenses like payroll, utilities, lease payments, and more. These C&I loans can either be secured or unsecured.

Accounts receivable financing

Also known as invoice factoring or financing, accounts receivable financing allows businesses to borrow against outstanding invoices. This type of C&I loan helps unlock any cash reserves tied up in receivables.

Asset-based lending

Businesses with weak cash flow but strong assets often benefit from asset-based lending (ABL). Lenders that offer ABL provide businesses with a credit line or loan backed by one or more of the company’s assets, such as receivables, inventory, or equipment. The loan amount is based on the assets’ value.

Small Business Administration (SBA) loans

Loans guaranteed by the SBA, including 7(a) and 504 loans, usually offer more favorable terms and lower down payments. These loans typically cover non-real estate expenses incurred by businesses. Popular Bank is an SBA-approved lender.

Advantages and disadvantages of C&I loans

Commercial and industrial loans offer businesses several advantages, but maximizing their return on investment requires understanding how they work and what to expect. Carefully consider the drawbacks of C&I loans to ensure you’re prepared if you decide to take the next steps. Compare the pros and cons of C&I loans below.

Pros

• Provides access to funds for expansion and growth
• Allows companies to retain ownership and equity
• Choose from multiple loan types and lender options
• Not tied to real estate

Cons

• Secured loans require collateral
• Variable interest rates can be higher
• Repayment periods are typically shorter
• Approval and funding times can be lengthy

How to choose the best commercial and industrial loan.

Start by identifying the purpose of the loan, establishing your desired loan amount, and outlining a solid repayment plan. Next, evaluate your business’s financial health, including its credit score, expected revenue, and other related parameters. As you compare lenders, make sure you consider loan terms, interest rates, fees, repayment schedules, collateral requirements, applicable covenants, and funding timelines. A clear understanding of these factors can help you select the best C&I loan for your business.

Choosing the right C&I loan starts here.

Whether you’re planning an expansion or just need support with daily operations, our team can help you evaluate your financing options. As an experienced commercial lender, Popular Bank works with business owners to structure C&I loans aligned with cash flow, growth goals, and long-term financial health. Contact a Relationship Manager on our lending team today to explore which C&I loan may best support your business.¹