Commercial law, also known as business law, is a body of law which regulates the conduct of people, merchants, and businesses who are engaged in trade, sales, and commerce. It is a broad area of law that frequently interacts with many other areas of law, such as environmental regulation, real estate, and food safety laws. Some of the largest branches of commercial law would be consumer protection, contract laws, and intellectual property laws.
Commercial and business laws are associated with some definitive legal issues. Because transactions between businesses and customers frequently involve a contract, contract violations are largely responsible for commercial law legal issues. More specifically, this would be a breach of contract, which can cause significant losses for all parties involved.
In addition to contract issues, common examples of commercial law legal issues include but may not be limited to:
- Advertising and marketing disputes and violations;
- Unfair competition issues;
- Starting a new business;
- Transferring or terminating a business;
- Consumer complaints; and
- Protection of intellectual property and trade secrets.
What Is Business Finance? Where Does Business Financing Come From?
Business finance, or business financing, refers to the way in which a business obtains funds for starting, maintaining, and/or expanding business operations. These can include monetary contributions from various sources, and may be used for different purposes.
An example of this would be business finance may be necessary for matters such as:
- Purchasing business property;
- Placing a down payment on business office rental space;
- Obtaining production machinery and other necessary equipment;
- Buying materials for initial production runs;
- Conducting market product research; and
- Purchasing inventory/stock of product.
As such, business financing planning may be essential in order to help get a business started. In response to these needs, there are many professional organizations that specialize in assisting businesses with financing.
Businesses may obtain financing from several different sources, including:
- Lending institutions specializing in business financing;
- Donations from various sources;
- Loan companies;
- Business grants; and
- Working in cooperation with other businesses.
Some businesses may utilize a variety of sources in order to help with financing. Additionally, a business may need to modify or revisit their financing sources over time, especially as the company expands and begins incurring new business costs.
What Are Some Common Issues Associating With Business Financing?
One of the largest legal issues when considering business finance would be the issue of repayment. Generally speaking, the original financing source must be repaid the money that they provided. The terms for repayment may be finalized into a contract for repayment over time. As previously mentioned, breach of contract is a common business law issue; as such, it is also a common issue associated with business financing, as issues may arise during repayment which would breach the terms of the contract between the business and the financier.
Another issue to consider would be the general size of the business. An example of this would be how financing a small business may be drastically different from financing a large corporation, or a non-profit organization. Additionally, it is important to remember that rules may vary depending on the nature of the business as well as local state laws.
Something else to consider would be how business formation affects financing options, similar to how the size of the business influences financial decisions. One of the biggest decisions that a business owner must make when forming their company would be to determine what type of business structure they want to use when registering their business. There are a number of different business formations, such as a corporation, a limited liability company (“LLC”), or a general partnership.
The way in which a business is formed will dictate factors such as:
- The amount of funds that they can receive from investors;
- How many people can sit on a board;
- Who will be held responsible for liabilities or debts incurred by the business; and
- How the business will be taxed.
What Should I Know About Small Business Financing Specifically?
Because small businesses are becoming increasingly popular, especially due to COVID-19, it is helpful to discuss small business financing specifically. One considerable struggle when starting a small business or startup is coming up with the money needed to establish and maintain business operations. This money is known as capital.
If a person does not have the capital they need in order to start their business, and they cannot borrow the needed funds from a family member or a friend, there are several financing options that may be available to them. Financing for a small business is largely influenced by the type of business that is being started. According to the Office of Advocacy for the United States Small Business Administration, in 2018, personal and family savings accounts were the most common sources of financing for small businesses.
Other common funding options for small businesses include, but may not be limited to:
- Obtaining a commercial loan;
- Partnering with investors;
- A business credit card that is issued by a bank;
- Applying for a government program for small businesses; and
- Crowdsourcing funds, such as through online fundraising platforms.
Government lending programs for small businesses are available at both the state and federal levels. These programs are intended to reflect and support the important role that small businesses play in strengthening the economy of the United States. In addition, these programs are used to promote the start of new businesses as well as promote the growth of small businesses already operating.
Many small businesses start off after obtaining some sort of small business loan. A small business grant is similar to a loan, except that it does not need to be paid back. These grants are generally a portion of money that is specifically allocated for a set purpose.
It is common for the party who is issuing the grant to attach conditions to the grant, such as only using the grant for a specific and approved purpose. An example of this would be how the grantor may specify that the grant money be used specifically for:
- Research and development;
- Advertising and promotion of the grantor’s interests; and
- Charity and non-profit related works.
Once again, these conditions depend entirely on the party who is granting the money. Most small business grants originate from either state governments or state-funded entities. The federal government only issues small business grants for very limited purposes, such as promoting tourism or other specific interests. Additionally, private companies can also issue grants for small businesses.
Is There Any Business Finance Assistance For Small Businesses During The COVID-19 Pandemic?
Special government programs are available for businesses that have been affected by COVID-19. The Paycheck Protection Program (“PPP”) of 2020 is a 7(a) loan designed to help small businesses that are affected by the ongoing COVID-19 pandemic. The PPP was reopened in 2021 and includes new loan availability, as well as additional funding for a business that is currently receiving a PPP loan. The program could be extended as the pandemic continues.
Financial assistance is being provided for small businesses during the pandemic. For those businesses that used traditional lenders, these lenders are generally providing payment deferrals and debt relief options. Additionally, the SBA is currently offering several relief options for businesses, non-profits, and faith-based organizations in order to recover from the impacts of COVID-19.
The SBA is providing funding options including:
- Paycheck Protection Program (“PPP”) loans, including:
- First Draw PPP loans; and
- Second Draw PPP loans;
- COVID-19 Economic Injury Disaster Loan (“EIDL”);
- SBA debt relief for existing borrowers;
- Shuttered Venue Operators Grant (“SVOG”); and
- Restaurant Revitalization Fund.
Do I Need An Attorney For Business Financing Issues?
An area commercial attorney can help you determine how best to finance your business according to your state’s specific business laws. An experienced and local business lawyer can help you determine which business structure is right for you. Additionally, an attorney will also be able to represent you in court, as needed, should any legal issues arise.