Business finance loans can be beneficial for new businesses, expanding businesses and businesses that want greater flexibility in managing their cash flow. In fact, commercial loans can be the ideal solution to several common business problems. But commercial lending is also more complicated than applying for a standard home loan. So, it’s important to have a full understanding of what business loans are, how they operate and which options would be most beneficial for your business.
What is a Business Finance Loan?
Commercial lending involves a range of different finance solutions, so it’s well worth talking to a business finance broker to ensure you end up with the right type of loan. Business loans can include lines of credit, finance for equipment or commercial premises and development finance. There are secured and unsecured commercial loans, and they can range from just a few thousand dollars up to $1 million (depending on eligibility criteria).
Some of the most common business loans include:
- Working capital finance: This includes a range of options designed to help a business manage cash flow, such as overdrafts, business credit cards and lines of credit. This allows a company to pay its bills and continue operating while waiting for debtors to pay their accounts.
- Commercial property finance: This is similar to a mortgage on a residential home, but it applies to the purchase of a commercial property. A commercial property loan will usually be secured against the property being purchased.
- Equipment finance: An equipment finance loan can assist with the purchase of commercial vehicles, machinery and even office equipment. This makes it a good choice for new businesses (that require equipment to start trading) or those that need to upgrade existing equipment.
- Business loan: A business loan allows you to borrow a set amount of money which will then need to be paid back in regular instalments. A business loan can have either a fixed or variable interest rate, allowing business owners to choose an option that will best suit the way their business operates.
Does a Business Finance Loan Need to be Secured?
A secured loan has an asset listed as a form of security. If the borrower defaults on the loan, the lender can seize the listed asset to recover the cost of the loan. With commercial loans, the asset could be a property, commercial vehicle or even warehouse stock. Business finance loans can be secured or unsecured, depending on a range of factors. If you want to apply for an unsecured business loan, then you’ll need to demonstrate that your business has been performing strongly and that you’ve consistently been paying your bills on time.
How to Get a Business Loan
If you want to apply for a business loan, then the best thing to do is contact an experienced business finance broker. A broker can help you to determine what kind of commercial loan is going to be most suitable for your business and which lenders are going to offer the most competitive finance product. A commercial finance broker can also help you get the necessary paperwork in order, to ensure you meet the lenders’ application criteria.
Lenders will typically be interested in your credit history, turnover, assets and existing debts but they may also want to see a business plan and your cash flow history to ensure you’ll be able to meet the minimum repayments. Every lender is different, with its own unique system for assessing a commercial finance application. That’s why it’s so important to involve a business finance broker from the very beginning – to ensure your business gets the right finance solution from the right lender.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.