The term commercial finance refers to the act of offering loans to businesses. Mainly it these loans are provided by banks or other commercial lenders that specialise in offering commercial loans.
When commercial banks offer commercial financing, the loans can be secured using business assets. Alternatively, you can access unsecured loans, where the lender relies on the business cash flow to repay the loan. You can use assets such as real estate, supplies or equipment and receivables from invoices as collateral for commercial finance. Seeking commercial finance may seem scary but it can help you in financing changes in your business which could lead to high returns on your investments.
Commercial finance is therefore a great solution for many businesses. Some of its many advantages include:
Increasing Working Capital
Working capital refers to the money that is needed for the day-to-day operations of your business. At times, your business may require commercial finance to handle its daily operations up to a time where your earning assets can cover your working capital needs. Acquiring commercial finance will help your business to get off the ground and grow just at the times it needs to. There is no holding back and missing potentially transformative opportunities.
At times, you may be looking for a bank to offer you commercial finance so as to purchase inventory. If your business is seasonal and most of the sales are made during holidays, you may want to purchase most of your inventory before the holiday season. This requires a big initial outlay, with high returns later.
In this case, you will need a bank loan before the holiday season to enable you purchase the inventory to prepare for that time. Bank loans intended for purchasing inventory are short-term and you can pay them off after the season is over.
When it comes to acquiring equipment, you can either buy it or lease it. You may need to buy furniture or rent storage to expand your operations, or you may need additional machinery to keep pace with growing demand for your products. However, these items don’t come cheap and can require significant investment. In cases where you need to invest to keep running, it is advisable to seek commercial finance to help bridge that initial gap.
Purchasing Real Estate and Expanding Operations
If you intend to purchase real estate in order to expand the operations of your business, a bank will be your most likely partner in securing commercial finance. The fact that you are expanding your business means that your business is successful and commercial finance providers love to support successful and growing businesses. Banks can offer you loans on real estate in the form of a mortgage and the real estate is usually used as collateral.
Improving Terms on a Larger Loan
If you are a new business and have no credit history, don’t assume there are no loan products for you. There are still providers with products designed specifically to help you build your credit rating and suit your start up’s needs. By acquiring a small loan amount to begin with, you can access great repayment terms which makes it easy for you to secure some of the funding you need, whilst building up your credit history and your relationship with your loan provider, which will increase your chances of obtaining a larger loan with improved terms in the future.
Hiring more staff
In any business, there are certain periods in the business year that are busier than others. During such times, you might require additional staff so as to get the job done but the extra staff comes with additional upfront costs.
At times, you may simply not have the funds to pay the extra staff, but not taking them on could see your business significantly lose out. Seeking commercial finance is the best way to cope with these issues. It will ensure that your payroll needs are met on time and your business can take advantage of all the opportunities available to it.
Many people are reluctant to seek commercial finance, thinking that it will come with crippling terms and conditions or that they simply won’t qualify for loans, when in fact both of these assumptions are wrong. Taking out a business loan could turn out to be the best thing your business ever did! Allowing you to expand your operations and meet all the demands on you without jeopardising your business’s smooth running. Planned properly, with realistic objectives, a business loan can set you on the path to even greater success.