What Are The Advantages Of Using Commercial Finance?

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If you’re a small business owner, it can be hard to secure finance from a bank. And even if your application does get accepted, lending criteria are strict and the loan terms may not as flexible as you’d hoped.

That’s why many people just like you look toward commercial finance, instead.

What is commercial finance?

In short, it’s any loan made to a business.

The term is a broad umbrella, however. Tons of financial products can be considered commercial finance, from standard business loans right through to mezzanine finance, eBay seller finance, and donation crowdfunding.

Each commercial finance solution is tailored toward a slightly different business need. A business loan is broad, for example: providing the capital required to make new investments.

Mezzanine finance, on the other hand, is used to plug a specific sort of funding gap in a commercial property chain.

All types of commercial finance fit into these broad buckets:

  • Loans, where a fixed amount is borrowed and repaid over an agreed period, at an agreed rate of interest.
  • Lines of credit, where an ongoing borrowing facility is established, allowing a business to borrow repeatedly within agreed terms. You can secure such borrowing against invoices, inventory, or other assets.
  • Property finance, where borrowed money is used for specific property-related outcomes.

Often lenders will be dedicated, commercial finance brokers.

Business team working on sales results

The advantages of commercial finance

So we’ve seen that commercial finance is flexible, now let’s take a look at some of the other benefits:

More forgiving to fledgeling businesses

For small businesses lacking the assets or track record that a bank would require to make lending viable, commercial finance presents a more feasible alternative.

Small business owners looking for commercial finance will find themselves greeted with a wealth of options, each of which will suit a slightly different business outcome. By working with a commercial finance broker like Funding Guru – one who has been on the other side, and knows what it’s like to be a small business owner – you’ll find yourself in good hands.

More forgiving to businesses with adverse credit histories

Not all companies have a rosy financial past, but we believe this shouldn’t hold you back from future successes. While a bank will happily put a black mark against your name and refuse to lend, commercial lenders (ourselves included) are often willing to look past problematic credit and forward toward your future.

We’ll look at your business plan and your current opportunities, and make a forward-looking funding decision rather than punishing you for the past.

A wider variety of finance solutions available

We touched on this briefly earlier, but it’s worth exploring a few other commercial finance options that are available from brokers:

  • Invoice financing: This revolving credit facility lets you borrow against part or all of your sales receivable, allowing you to access the capital locked in late or unpaid invoices.
  • Bridging loans: This type of property finance can fill the funding shortfall between deciding to buy a property and getting a mortgage, keeping things moving.
  • Asset refinance: This type of secured loan lets you borrow against an asset (or assets) owned by your business to unlock the capital it represents and turn it into ready cash.
  • Sale-and-lease-back: Here, you sell an asset outright to a lender, and pay a monthly fee for ongoing access. This is a great way to access high-value assets with short lifespans.
  • Crowdfunding: There are many types of crowdfunding, from equity-based through to donation-based. Depending on the project, other types will be more suitable than others.

This is just a small sample of the commercial finance options offered by Funding Guru.

Lower interest rates

Although each lender will be different, interest rates tend to be lower in commercial borrowing because of the competitiveness of the marketplace. The interest rate varies between finance type as well, so the presence of more varied borrowing solutions gives you a better opportunity to shop around.

Quicker access to funds

Generally speaking, there’s less red tape when borrowing from a commercial finance broker. Funding Guru aims to approve loan applications within 24 hours, for example: A far smaller timeframe than you could expect to find from a high street bank.

Shorter application processes

Following similar logic to the previous point, the application usually takes less time as well. Our business finance application is just a matter of filling out an online form, sending a few documents via email, and chatting through the terms of the loan.

Happy young couple meeting with a broker in her office leaning over the desk to shake hands, view from behind the female agent

What is a commercial finance broker?

We’ve used the term a couple of times in this article. Here’s a definition in case you’re not sure what it means.

A commercial finance broker is a specialist in finding the right finance solutions for their business needs, often with a wealth of experience in relevant industries. Many finance brokers have been business owners themselves in the past, and have a greater understanding of the challenges facing small businesses (and their solutions!)

What is commercial property finance?

The term commercial property finance refers to any financial product intended to facilitate the acquisition of new property, the redevelopment of an existing property, or the refinancing of a property.

This type of funding is explored in more detail in another Funding Guru 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.

Answering this question properly is a case of taking a long, hard, and realistic look at your business and the challenges you’re looking to overcome.

Then, when you’ve got a clear picture of where you are, where you want to be, and the finance solutions that could help you get there, we recommend talking to a commercial finance broker to get their guidance.

This professional input can be transformative for small business owners looking to take their business forward. Get in touch with Funding Guru if you’re ready to move to the next level.