A commercial loan is a type of short-term or long-term financial instrument that business owners avail of to address their capital needs. The repayment span of these loans ranges from 15 to 30 years in commercial lending. The sanctioned loan amount can be used by organizations to increase the working capital, meet operational costs, build new infrastructure, acquire new machinery, and other such expenditures. Commercial lending majorly helps enterprises that have just started the business and further want to add or expand any of the above mentioned resource. The demand for commercial loans is increasing rapidly as online lenders have started to implement technologies such as blockchain, machine learning, and artificial intelligence to improve the customer experience, which is driving the commercial lending market growth.
COVID-19 Impact on Commercial Lending Market
The outbreak of COVID-19 across the globe has favorably impacted the global commercial lending market growth. The positive growth of the market is majorly owing to the increase in industrial and commercial loans due to many enterprises going out of business during the pandemic period. Besides, the engagement of small & medium-sized enterprises (SMEs) in commercial lending had a crucial role in this increasing development. Moreover, banks reported being stunned due to the surge in commercial loans in the trying times, which occurred when businesses required additional financing. All these factors have significantly impacted the growth of the commercial lending industry in the COVID-19 crisis.
Commercial lending Market Trends and Developments
The companies operating in the global industry are adopting several growth strategies and business tactics such as partnerships, collaboration, business vs expansion, and product launches to obtain a leading position in the global industry, which is predicted to drive the global commercial lending market growth in the upcoming years.
For instance, in November 2021, Fundbox, a San Franciso-based financial services platform that offers loans & financial products to small businesses, raised $100 million in a Series D funding round at a valuation of $1.1 billion. The aim of the company is to solve SMBs’ working capital needs through its payments and credit offerings.
In December 2021, Kabbage, an online financial technology company, announced the launch of ‘Kabbage Funding’ to offer eligible small & medium-sized businesses flexible lines of credit from $1,000 and $150,000 with the strong backing of American Express. Kabbage Funding helps small businesses to apply for loans in minutes to access working capital 24/7 and help manage cash flow of their company.
In February 2022, Funding Circle, the largest online small business loans provider and a commercial lender, entered into a partnership with Chaser, the credit control and accounts receivable software company, to help their customers to easily apply for a loan from the peer-to-peer lending platform. The aim of Funding Circle and Chaser behind the partnership is to help small & mid-sized businesses around the world to improve their cash flow.
Forecast Analysis of Global Market
The global commercial lending market is projected to witness an exponential growth over the forecast period, owing to the continuous technological innovations in the commercial lending sector and the astonishing growth in the internet lending industry. Conversely, the non-performance of organizations and the stringent qualifying criteria for commercial lending are expected to hamper the market growth in the projected timeframe.
The lowest interest rates associated with commercial lending which allow business owners to access crucial funding and the increasing growth in the number of startups around the world are the significant factors and commercial lending market trends estimated to bolster the growth of the global market in the coming future. According to a latest report published by Research Dive, the global commercial lending market is expected to garner $27,406.6 billion during the forecast period (2021-2028). Regionally, the Asia-Pacific market is estimated to grow at the fastest rate by 2028, owing to the increase in the number of small and medium industries and technological advancements taking place in the region.
The key players functioning in the global market include Merchant Capital, Fundbox, American Express Company, Credit Suisse, Goldman Sachs, Funding Circle, Kabbage, LoanBuilder, Fundation Group LLC, and OnDeck.