Commercial Finance refers to the variety of business finance products. These can offer both short and long-term solutions for your business and come from an external source. In its basic terms, commercial finance is a loan or mortgage given to a business, which can be used for numerous reasons. You may be familiar with the term ‘business loan’ which is exactly what this is! Commercial finance is lending which is designed for businesses instead of solely for the individual and can be a way of helping your business to thrive. Throughout this blog, we will explain what commercial finance is and how it can have a positive impact on your business. We will also take you through some of the pros and cons to be aware of when taking some out.
Why would I need Commercial Finance?
There are a great number of reasons why commercial finance might be offered to a business. This could include the purchasing of new premises or to solve an urgent cash flow issue. If your business faces a difficult obstacle to your growth or continued business, then it can provide the necessary funding to overcome it. Perhaps you need a short loan to cover staff wages during a difficult month or have come across an exciting opportunity. By turning to commercial finance, you are able to resolve these issues with a business loan which can cover a lack of finances at that time.
If you find that you have reached a point in your business where an opportunity arises which is simply too good to turn down, but need a bit more money to do so, then commercial finance can give you a helping hand. There may be an opportunity for you to make an investment or purchase land or facilities which would be hugely beneficial to your business. If you find that you do not have the capital on hand to make such an investment, then commercial finance serves as a solution to such a shortfall. Commercial finance can serve as a temporary solution to help you grow your business, without the fear of missing out on an opportunity.
Who is eligible for commercial finance?
Anybody can take advantage of commercial finance to help them with insufficient funds in their business. If you are an SME owner then you have the option of applying for financial help to ease strains on your business. It can lend a helping hand to smaller and medium sized businesses, as it is now much more easily accessible for companies, with almost any business now able to receive commercial finance. Any business owner is able to apply for a loan or mortgage. The idea of taking on additional debt can be a daunting one. It might just be the boost that your business needs to take the next step towards growth and improvement.
This is especially useful option for small businesses who don’t have a track record needed to authorise a loan. Therefore, commercial finance is a great way for businesses to receive the support they need to grow their business. There are a wide number of businesses which offer solutions for you so that you don’t have to go through your bank to receive financial support. Banks can typically be very conservative when it comes to lending smaller businesses money. They are often unwilling to approve what they might consider a ‘risky’ proposition. Commercial finance offers a much wider number of sources than only the banks. This means that somebody will certainly support your business with a loan.
But surely this will take ages!
We all know that feeling of waiting what seems like an eternity for pay day every month. Nobody likes waiting for things, but luckily there is no need to be patient with commercial finance. You should be able to receive your loan nearly instantly.
Using commercial finance also provides faster access to the funds. This means that you are not waiting around whilst an opportunity slips through your fingers. Many businesses offer a verdict on your application within 24 hours. You shouldn’t worry about applying for it. With a wider number of possible companies to borrow from, there will be somebody willing to help your business.
Going through a bank like Natwest or Barclays to obtain finance could be costing you valuable time and money! Using a commercial finance broker can speed up the entire process. This means that you can dedicate more of your time to your business. A broker can also provide different options for your commercial finance, finding the best option possible for you.
Are there any downsides to this?
It’s important to know that commercial finance comes with a few disadvantages. There can be several hidden costs involved with using the service. Firstly, your loan provider may charge you a service fee, which does make things more costly. Similarly, like any loan, you will need to pay back interest along with any money which you have borrowed. This is something which you should consider when taking out such a loan. The amount that you are required to pay back will cost more than the sum which you have borrowed. You also have to pay interest back on your loan at an agreed rate. This might have a negative effect on your profits. This is especially apparent when companies incorrectly sell you a business loan. You may pay more money than you owe without even being aware of it.
Unfortunately, like many unregulated industries, commercial finance is at risk of being mis-managed. Interest is charged at a far too high rate, which is where we come in! A lack of regulation means a lack of checks with the amount of interest which you are charged. This can lead to mistakes being easily made. Whilst the amount might not seem large in the short term, over time the total amount can grow severely. This will have a detrimental impact on your business.
At Secured Lending Audit, we work tirelessly to find out whether you may have been overcharged on a commercial finance. To receive your Free Audit, contact us today.