Whether you realize it or not, you probably make dozens, if not hundreds of different commercial transactions every single week. Maybe even every day, depending on how much you like to shop.
You don’t have to be in business in order to make commercial transactions. In general, every transaction made between a consumer and a business, a business and a business, or between a government entity or non-profit organization and a business, is considered a commercial transaction.
If a purchase is made where at least one involved party is a business or service provider then you’re making a commercial transaction. These all come under specific laws and regulations.
What are the most common types of commercial law secured transactions? Keep reading to find out.
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1. Physical Retail
The most common type of commercial transaction, for hundreds of years, has been the retail-to-consumer transaction, person to person. Today, when you visit the grocery store and make a purchase, you are making an in-person, retail transaction.
Likewise, if you visit a hair salon, a coffee shop, or a car dealership, you are engaging in a retail commercial transaction. You aren’t buying directly from manufacturers or wholesalers.
You are buying from the retailer, which has likely sourced their products from various wholesalers, helping you get access to a wide variety of products from one brick and mortar storefront.
If you want to pay using cash or check, then this is usually the only option for consumers.
2. E-Commerce Retail
In the last 20 years, we have seen a dramatic shift from in-person retail to e-commerce. With the advent of the internet, and the extensive logistics networks created by parcel delivery providers like FedEx and UPS, making purchases online has become the new normal.
In fact, it has become so normal that countless brick-and-mortar stores have gone out of business, as fewer people are looking to drive to a store when they can shop from their couch.
The business model is the same. Retailers still fill their warehouses with products sourced from manufacturers and wholesalers and make those available to purchase through a website.
Prior to e-commerce, customers looking to shop from home would browse physical catalogs, mail in an order, or call in an order over the phone, having products shipped to their door.
3. Wholesale to Consumer or Retailer
Then there are transactions involving the wholesaler. The traditional model of selling physical goods goes from manufacturers to wholesalers then wholesalers to retailers, then to the consumer.
When wholesalers sell to retailers, much larger orders are placed. They’re able to purchase in bulk and enjoy cost savings as a result. They then mark those products up and sell them to consumers.
When retailers make a purchase from a wholesaler, they usually don’t pay upfront. Instead, the wholesaler will send an invoice, generally payable within 30 days.
This gives retailers more time to manage their cash flow and plan their purchases more effectively. Sometimes, especially for new business relationships, credit card payment is required upfront.
After building a trusting relationship, payment terms are often accepted.
4. Business to Business Commercial Transactions
There are plenty of business transactions that occur that don’t involve the traditional wholesale-to-retail model.
For example, one business might need to use the products or services from another business. One example is computers and phones.
Company A might be an insurance agency. In order to serve their customers, they need computers and telephones, along with various other electronics.
They then turn to Company B, which produces computers and phone systems. They then pay the full cost of the equipment that they need. In these types of transactions, businesses don’t normally get discounts.
Wholesale discounts don’t apply if you are the end-user. Every business makes commercial transactions with other businesses. From the furniture used to fill an office building, to paper products needed to handle everyday tasks, B2B commercial transactions are very important.
5. Business Loans
Every time a consumer or business takes out a loan, they are also making a commercial transaction. Lenders are businesses that offer products (loans). Other businesses that need financing pay the lender in exchange for that product (closing fees, origination fees, and interest).
When businesses make these types of transactions, they also create a filing statement in the lender’s UCC portfolio. UCC financial statements are filed by lenders as a way of declaring their rights over the loan collateral, should businesses default on the loan.
In order to cancel or adjust a UCC financial statement, the lender should then file a UCC termination statement, or another type of UCC3 statement, to cancel or adjust the lien as needed.
So although business loans are more complicated transactions, they are still one type of commercial transaction.
6. Consumer to Consumer
Depending on how you look at it, consumer-to-consumer transactions could be considered commercial transactions or not. It really depends on the type of personal property being sold.
If a consumer is hosting a garage sale and trying to get rid of some personal belongings for a few dollars apiece, most people would say this isn’t an example of a commercial transaction. The seller isn’t trying to run a business.
They’re just trying to clean out their home and make a few extra bucks. They won’t need to fill out any government paperwork or pay taxes on their income (so long as it doesn’t exceed $600). There isn’t a commercial transactions law to be mindful of when hosting a garage sale.
When you sell a car to another consumer, you might consider that a commercial transaction. Car sales involve a lot more money changing hands. They also involve government paperwork.
You’ll need to sign the title, record the sales price, and the buyer will likely have to pay sales tax to their state authorities.
What Type of Transactions Do You Make?
There are many other types of commercial transactions taking place every day. Many of them are variations of the transactions listed above. It pays to understand what type of transactions you make on a regular basis, and what type you might need to make in the future, as they all have different requirements and protections in place.
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