Commercial finance can often be a brilliant solution for
those in search of financial aid. There are several different options
available, with certain packages designed to suit certain business types and
sectors. Importantly, commercial finance gives you alternative options to the
traditional bank loan, or even borrowing money from friends and family. Commercial
finance can be helpful for all manner of reasons, growth, gaining new assets, stopping bailiffs or just
getting yourself enough cash to keep going.
So what are the options, and how can you decide which one is
right for you? Each of the below represents a general form of commercial
finance. However, each has the potential to be slightly modified by the lender,
if it suits both parties.
Trade finance is a form of commercial finance used to fund
international trading. With such big complications involved in trading across
the seas, there are often lots of considerations that need to be listened too.
A common problem for international traders is both importers
and exporters being left waiting for payments. Essentially trade finance is
there to help businesses have the necessary working capital so that they are
able to meet all of their day-to-day obligations. Importantly for importers and
exporters, trade finance can also help strengthen relationships. If you can
obtain or receive goods, without having to wait for repayments, then both
business parties can build a strong relationship base to grow from.
The majority of finance will communicate in a range of
different languages and will look to provide finance in the preferred currency,
whilst also keeping tabs on the potential interest rates involved from
different parts of the planet.
Regardless of how big your business is, purchasing brand new
equipment, whether it be new tech, office equipment, assets or machinery, it
can be a huge cost. Asset finance gives you the option of spreading out all
those costs and slowly paying back the debt over time, gaining the new asset.
The sort of costs incurred here, especially for start-ups and SME’s can
potentially be huge, so forms of asset finance gives you the option of
spreading the costs gradually over time.
The assets themselves form security for the lender, so if
you do end up debunking on payments, they will claim the asset back. The cost
is normally spread over the course of the asset’s lifespan, but vitally, asset
finance can give you a level of stability cash flow wise, as you are able to
plan ahead and better work out your incomings and outgoings.
Very similar to asset finance, hire purchase falls under its
bracket and is likewise a great solution to paying huge upfront costs. The
agreement would see a business paying an initial deposit, then paying the
remainder of the asset in instalments, which are usually monthly, however, this
can be changed depending on your agreement and circumstances. As a business,
you are able to acquire the top assets within the market place, replace old
ones or grow your business without having to pay the large up-front outlay
If you’re looking for an injection of cash without any of
the hassles of a bank loan, refinancing could be an ideal solution. However,
for lenders agree to a refinancing deal, you need to be asset rich, as
essentially you borrow money, which is then secured against the value of your
assets. In certain sectors, businesses can often find themselves asset rich but
cash poor, which can massively halt a businesses progress.
When it comes to repayments, just like asset finance, you
are able to repay back any loans in monthly instalments. Refinancing also
doesn’t stop you using any assets so you can continue trading as normal.
Included with a lot of commercial finance deals is a debenture.
This is effectively a holding charge which allows the lender to take the assets
in question, if your repayments fail.
When it comes to assessing your various options,
the most important thing any business needs to consider, are the potential
costs involved if you don’t decide to use asset finance. What bearing could
this have on this business? You could miss the opportunity to grow the
business, to give employees their well-deserved pay rise, or in the absolute
worst-case scenario, face the prospect of administration