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What is Commercial Finance?

Commercial finance is a term used to cover a wide range of different financial products that are available to businesses. Commercial finance products are most often sought after by business owners who want to grow their business but are restricted by the availability of funding. For example, this could be a smaller amount of funding to improve your business services by buying new equipment. Alternatively, it could be a greater amount for something like a large-scale remodel for your business.

Who Can Obtain Commercial Finance?

Commercial finance is available to limited companies and sole traders. However, it is not available to private individuals. Your eligibility to obtain this type of finance will depend on the criteria of each financial product and the current financial situation of your business. Accordingly, the commercial property finance interest rate will also vary dependent upon the lender and your current situation.

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What Are Asset Finance And Invoice/Receivables Finance?

Asset finance is one of the main types of commercial finance. Specifically asset finance refers to both funding that is secured against your existing business assets. However, it also applied to funding to acquire more assets. This is a wide area of commercial finance. 

Invoice/Receivables finance is another popular kind of commercial finance which is used by companies trading on credit. Essentially, the lender will advance you money based on unpaid invoices.

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How To Finance Commercial Property

Commercial property can be financed by using a commercial mortgage. This is a specialised area and requires specific knowledge. We are expert commercial mortgage advisers. See our Commercial Mortgage page for more information.

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What Types of Commercial Finance Are There?

There are basically three types of commercial finance.

Short-Term Commercial Finance

There are many different commercial finance products on the market. Short-term commercial finance options include products such as credit cards, overdrafts and trade credit. These types of finance products are good for smaller amounts of money that need to be borrowed over a shorter period of time. Consequently, this would be useful for a business looking to invest in a low-scale remodel or purchase new minor equipment. Importantly, business credit cards are based on the income of your business. As such, the credit limit will be different to what you might get on a personal credit card.

Medium-Term Commercial Finance

Medium-term commercial finance options include products like crowdfunding, equipment leasing and peer-to-peer lending. Peer-to-peer lending is a loan that involves investors lending money to a business. Commonly, it is obtained via an online platform. Therefore, this means the money you borrow for your business comes from several different individuals. As opposed to, a high street lender, intending to secure better interest rates for both you as the business customer and the investors. 

Crowdfunding refers to raising money from a wide group of people in smaller amounts. Unlike, borrowing the full amount from a single lender. There are many different types of crowdfunding methods available. If you would like more information on this specific type of commercial finance, you should speak to a commercial finance broker who specialises in crowd funding. Crowd funding can be a complicated and a widely misunderstood area of commercial finance.

Short-Term Commercial Finance

Long-term commercial finance options include business loans and asset-based lending. These commercial finance products are for larger sums of money that will be paid back over a longer period of time. Asset-based lending means borrowing money that is secured by assets such as equipment or property. A business loan is where you borrow money from a lender and pay it back with interest. 

The type of commercial finance product you will need is dependent on the amount of money required. Also, the reason for the funding being required and the length of the loan term you need. Many of these factors are dependent on the size of your business. If you are unsure which commercial finance product is right for you, it is worth considering reaching out to a commercial finance broker who can advise you on the best way forward. An interest only option may be possible.

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Should I Use A Commercial Finance Broker?

Navigating commercial finance can be a confusing and stressful process for you. Above all, a commercial finance broker will assess your needs and requirements, and advise you on the best lender and the best commercial finance product.  Basically, by using a commercial finance broker, you are ensuring you will get the best commercial finance product for your requirements at the best available rates. 

There are many commercial finance products out there in the market and lots of lenders, so it can become difficult for you to navigate. It is a saturated market, and this can be overwhelming. Particularly, if you are a small business owner who is perhaps less experienced in this marketplace.

To summarise, commercial finance is a complicated area with many different products available. Typically, the type of commercial finance product you require is dependent on the size of your business, the reason why you need the funding, and the loan eligibility criteria. We recommend you speak to a commercial finance broker who can help you identify the best product and the best lender for you and your business.


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