Small businesses can have difficulty securing bank financing. In addition, even if your application is accepted, the loan terms may not be as flexible as you would like.
Therefore, many people like you look at commercial finance instead.
How does commercial finance work?
Contents
The term refers to any loan made to a business.
However, the term can be applied to a wide variety of subjects. Commercial finance can cover a variety of financial products, such as business loans, mezzanine financing, eBay seller financing, and donation crowdfunding.
Each commercial finance solution is tailored to meet the needs of a specific business. A business loan, for instance, can provide the capital for new investments.
The purpose of commercial finance is to fill a specific funding gap in a commercial property chain.
All types of commercial finance fit into these broad buckets:
- In loans, a fixed amount is borrowed and repaid over an agreed period, at an agreed interest rate.
- A line of credit is an ongoing borrowing facility that allows a business to borrow repeatedly within agreed terms. These loans can be secured by invoices, inventory, or other assets.
- Finance for property, in which borrowed money is used to achieve certain outcomes related to property.
Lenders are often commercial finance brokers.
Commercial finance has many advantages
Now that we’ve seen that commercial financing is flexible, let’s look at some other advantages:
Business start-ups are more forgiving
Commercial finance is a more viable alternative for small businesses lacking assets or track records required by banks to make lending viable.
Small businesses looking for commercial financing will find a variety of options, each of which will suit a different business outcome. With Vakilsearch, you’ll find a commercial finance broker who understands what it’s like to be a small business owner and has been there.
Forgiving of businesses with adverse credit histories
Although not all companies have a rosy financial past, we believe this shouldn’t limit your potential. In contrast to banks, commercial lenders, including us, will often look past problematic credit and forward to your future.
Instead of punishing you for past errors, we’ll consider your business plan and your current opportunities.
We offer a wider range of finance solutions
In addition to the options we discussed earlier, brokers offer a few other commercial finance options as well:
- Invoice financing: With invoice financing, you can borrow against part or all of your sales receivables, allowing you to access the capital locked up in late or unpaid invoices.
- Bridging loans: They bridge the funding gap between buying a house and getting a mortgage, keeping things moving.
- Asset refinance: With this type of secured loan, your business can borrow against its assets to unlock the capital they represent and convert them into cash.
- Sale-and-leaseback: In this case, you sell an asset outright to a lender, and pay a monthly fee for ongoing access. It’s a great way to access short-term, high-value assets.
- Crowdfunding: There are several types of crowdfunding, including equity and donation-based. Some types will be better suited to certain projects than others.
We offer a variety of commercial finance options at Vakilsearch.
Lower interest rates
Despite the fact that each lender has a different interest rate, commercial borrowing tends to have lower rates due to the competitive market. Furthermore, interest rates differ between different types of financing, so when you have more options, you can shop around better.
Quicker access to funds
Brokers generally have less red tape than banks. The Vakilsearch loan application will be approved within 24 hours: A significantly shorter timeframe than you’d find at a high street bank.
Streamlining the application process
Similar to the previous point, the application usually takes less time as well. The application process for our business finance is as simple as filling out an online form, sending a few documents by email, and discussing the terms with our team.
How does a commercial finance broker work?
We’ve used this term a couple of times in this article. In case you don’t know what it means, here’s a definition.
An experienced commercial finance broker specializes in finding the right financing solutions for their clients’ business needs. Since many finance brokers have been business owners themselves, they have a deeper understanding of the challenges facing small businesses (and how they can overcome them!).
How does commercial property finance work?
Financing for commercial property refers to any financial product used to finance the acquisition, development, or refinancing of commercial real estate.
This type of funding is explored in more detail in another Vakilsearch blog post.
Is commercial finance right for you?
As a small business owner, the most critical question is whether commercial finance is the right option.
As we’ve seen above, the situations that can lead a business owner toward borrowing vary massively. As do the potential solutions on offer.
The best way to answer this question is to take a long, hard, and realistic look at your business and the challenges you’re facing.
Once you know where you are, where you want to be, and the finance solutions that could help you there, we recommend speaking to a commercial finance broker for guidance.
Business owners looking to take their business forward can benefit from this professional input. Vakilsearch can help you reach your goals.