Commercial finance is a type of financing exclusively for use by businesses, but there's a huge variety of uses. Commercial finance refers to property, vehicles, assets, and even funding for the upfront costs of businesses. It's a great source of financing for smaller businesses looking to develop and grow.

Commercial brokers are essential mediators between clients and lenders, they will consult with business owners, analyse their financial records, and reach out to lenders to acquire a loan with the best possible interest rate. Commercial brokers will liaise on several loan types, from properties to vehicles, and more.

When applying for commercial finance, your eligibility for certain loans will depend entirely on a few factors: creditworthiness, financial history, and business performance. It's important for a lender's comfort that you have the financial solidity to pay your commercial loan and a history of paying your debts to demonstrate that the loan will be paid on time.

Suppose your creditworthiness or overall business health suggests you cannot acquire the desired commercial financing. In that case, you'll likely face much larger interest rates to reduce lender comfort or even complete denial.

Commercial finance is an effective way of securing capital, without reducing a business's cash flow. It's primarily focused on specific commercial needs, such as stock, new equipment, or real estate. Unlike the broader term, 'business finance', commercial finance is tied specifically to growth, expenses and acquisition.

When it comes to financing solutions, commercial finance offers an array of products for business owners to choose from, here are some of the primary choices:

Term Loan:

A term loan is a type of loan where a company receives a lump sum to repay over a set term. For example, a company borrows £100,000 to repay monthly for a fixed period of five years. This commercial finance product is useful for smaller businesses that require funding for operational costs, including employee payment and stock inventory.

Asset-based Lending:

Asset-based lending is a loan that is secured against an asset from a business, known as collateral. Should you fail to repay your loan, the lender can then seize the asset to repay the debt accrued. Whilst repaying a loan, the asset linked to the loan itself is still owned by the business, but if you decide to sell the linked asset, you must repay the loan in full.

Invoice financing:

For countless industries, an invoice for a product or service can have delays of up to 90 days, leaving your business short on cash flow which could otherwise be spent on upfront costs and even growth. Invoice finance is a specialised loan for businesses with significant unpaid invoices (accounts receivable) which are then used as collateral by lenders. The lender assumes the debt of the business and therefore will collect the accrued invoices to pay the debt owed, relieving the pressure from the business owner.

Trade finance:

Trade financing is a product which is designed to facilitate international trading, providing capital for upfront international trading costs.

Equipment leasing:

If your business is reliant on equipment to run, be it a computer or a crane, equipment leasing is a cost-effective way of acquiring technology that you might need for the operation of your business. Over time, the business owner completes monthly repayments of the equipment during a specified term, but what happens after the payment period is dependent on your contract terms. 

Lenders can offer a lump sum or balloon payment for the business owner to purchase the equipment, allowing the business to fully own it. Those who only need equipment temporarily, however, can stick to the monthly payments and return the equipment after the lease has ended.