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Industrial Loan Companies Canada
A C&I loan is a staple product of commercial banks and provides financing for commercial and
industrial purposes. This loan is typically made to corporations, sole proprietorship,
partnerships, and other business enterprises that are a going concern. The rate of this loan is
based on the individual lenders’ rate or prime rate. The main purpose of a C&I loan is to finance
capital expenditures or provide working capital to the borrower. Debt service coverage
requirements for a term or amortizing loan is generally 1.1:1, and is defined as principal
payments, plus interest expense, throughout one fiscal year analyzed on a 12-month trailing
A C & I Loan is a loan to a business rather than a loan to an individual consumer. These shortterm loans may have an interest rate based on individual private lenders’ rate or prime rate
and are secured by collateral owned by the business requesting the loan.
The main purpose of a C&I loan is to finance capital expenditures or provide working capital to
the borrower. A C&I loan is generally a short-term (1-2 year) line of credit or term loan, secured
by collateral and cash flow owned by the business requesting the loan.
In lending agreements, collateral is a borrower’s pledge of specific property to a lender, to
secure repayment of a loan.] The collateral serves as protection for a lender against a
borrower’s default —that is, it can be used to offset the loan to any borrower failing to pay the
principal and interest under the terms of a loan obligation. If a borrower does default on a loan
(due to insolvency or other event), that borrower forfeits (gives up) the property pledged as
collateral, with the lender then becoming the owner of the collateral. In a typical mortgage loan
transaction, for instance, the real estate being acquired with the help of the loan serves as
collateral. Should the buyer fail to pay the loan under the mortgage loan agreement, the
ownership of the real estate is transferred to the bank. The bank uses the legal process of
foreclosure to obtain real estate from a borrower who defaults on a mortgage loan obligation.
A pawnbroker is an easy and common example of a business that may accept a wide range of
items as collateral rather than accepting only cash.
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