Commercial finance is the broad term for business money. Commercial finance refers to the financial services and products that aid business growth, aiming to support the ongoing success of a business.
Commercial finance comes in a variety of forms, here’s a guide to help you understand the various types of commercial finance:
Asset Finance
Asset finance is a type of lending that allows your business to acquire equipment, machinery or vehicles without needing to pay the full amount in one payment. The cost is instead spread across regular payments, making it easier for you to manage cash flow while accessing the assets your business needs.
Business Loans
A business loan is a financial product that provides funding to businesses for various purposes. These loans are typically offered by banks and commercial lenders, and the borrower agrees to repay the amount borrowed, plus interest, over a specified period.
Hire Purchase
Hire purchase finance allows your business to purchase an asset without having to pay the full amount up front. Hire purchase finance is most commonly used in commercial vehicles or heavy machinery. You pay a monthly amount to the lender who purchases the asset on your behalf, and ownership of the asset is not transferred until you’ve made the final payment and paid the option to purchase fee.
Leasing
Equipment leasing is a form of financing that allows your business to acquire hard or soft assets without the upfront costs associated with large purchases. For example, your business may need to acquire equipment, refit their premises, or buy a commercial vehicle in order to improve your operations.
The lender purchases the product, and your business then leases it back through monthly payments so your business can use the equipment. Fixed payments are made throughout the life-cycle of the term until the agreement ends.
Commercial Bridging Loans
Bridging loans help you to ‘bridge the gap’ when your business needs funding, but is waiting for funds to become available. Commercial bridging loans are often used to address the shortfalls in development projects, or when buying an asset.
Merchant Cash Advance
A merchant cash advance is a short term loan for businesses that frequently accept card payments. The lender receives an agreed percentage of your business’s daily card sales until the advance is repaid.
Which type of commercial finance is right for your business?
Commercial finance covers a broad range of financial products. As with all financial decisions, the process is complex and takes time to find which solution is best for your organisation. It is important that you understand the implications and options available to you, and we at Mill Wood Finance can help you to figure out your opportunities and the potential pitfalls with commercial finance.
If you’re looking for a broker that understands the intricacies of commercial finance, get in touch with Mill Wood.
