What is Commercial Finance?
So firstly, a simple definition. Commercial finance is the term given to a huge range of business finance products that include both short and long-term solutions, offered by a provider external such as a lender, to the business. A business might seek commercial finance if they have reached a point where growth is imminent. Sometimes there is an obstacle in the way of attaining necessary growth – and that obstacle is funding.
Commercial finance ensures that businesses, regardless of size, can thrive and hit their targets, rather than miss out purely because they must wait to generate enough cash to re-invest for themselves. Commercial finance is essentially a way of providing working capital for businesses. Better access to commercial finance has paved the way for small and medium-sized enterprises (SMEs) to flourish.
Recently the commercial finance landscape has expanded, whereas once there were just banks, alternative finance providers have businesses more options than ever before. 25% of small-scale businesses have their loan applications rejected by banks but these new alternatives give fast access to businesses who would otherwise have to go without.
Advantages of Commercial Finance:
Flexibility:
Whilst small businesses may find it hard to secure a loan from a bank, commercial finance offers more flexibility. Commercial finance lenders are often more forgiving to businesses with adverse credit histories and are often willing to look past problematic credit past. Not all businesses have clear financial pasts, and whilst banks may refuse to lend to a business with an adverse past, the use of commercial finance will help forge opportunities for the future. 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.
By working with a commercial finance broker, such as the team at Funding Bay, they will be able to source you the best available offer for your business by working closely with the lenders.
Variety:
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. Each type of facility offers different advantages depending on your financial needs. Funding Bay is in contact with over 250 lenders and is, therefore, able to offer a wide variety of loan types. Funding Bay is in contact with numerous lenders including, Nucleus, Funding Circle, Fleximize, Merchant Money, and White Oak, just to name a few.
Types of finance include:
- Invoice Finance: Invoice finance allows businesses to release cash tied up in their aged receivable accounts. Typically, the whole ledger is funded although there are several alternative providers who offer selective debtor and selective invoice finance. Factoring facilities provide both advanced funding and credit control, on a disclosed basis with the client’s customers. Invoice discounting facilities typically offer just the funding and can be either disclosed or on a confidential basis.
- Asset Finance: Asset finance releases cash against existing assets or can be used to obtain additional assets without having to pay the upfront costs. Typically, the upfront cost is incurred by the lender, and then the borrower will pay regular installments for a set period of time to pay back the principal and interest payments.
- Merchant Cash Advance: MCAs are ideal for sectors that process a large proportion of their revenue through their credit card terminals. The MCA is given visibility of the processed revenue, advances funds based on their average monthly receipts and the repayments are then taken directly out of the future revenue. MCAs are particularly popular with businesses in the leisure/retail sectors where a large proportion of their revenue occurs on the shop floor.
- Supply Chain Finance: SCF maximizes working capital for businesses by managing payments to their supply chain. Supply Chain Finance facilities vary from lender to lender. They can be either buyer or supplier led. Buyer led facilities typically involve the buyer incurring the costs and extending the creditor payment terms with the lender. Supplier led facilities involve the supplier incurring the cost of early discount.
Funding Bay provides an added advantage to commercial finance by offering a simple and straightforward guide through the market. Whilst commercial finance offers a wide variety, this ever-growing market can be overwhelming. With so many lenders and diverse option, Funding Bay hope to simplify the market for our clients and ensure that they can get tailored financial needs for their business. Funding Bay will do the work in terms of selecting the most suited option, and ensuring that you get the best deal possible. Our team of experts will sort the application process for you in order to present you with an offer as efficiently as possible.
