What is Commercial Finance ?

If you’re in the Business World, it is most likely that you’ve heard these words “commercial finance”. Despite it being common words within the business industry, it can still conjure up uncertainty for some business owners, unaware of the options available to them or what is really means.

A simple definition. Commercial finance is the term given to a massive range of business finance products that include both short and long-term solutions, offered by a provider external to the business. In this case Bijoux Financier LLC UAE.

Why would businesses take out a Commercial Loan?
A business might need 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/ or that obstacle is funding.

Commercial finance make sure that businesses, regardless of size and age, can thrive and hit their targets, rather than miss out on them, purely because they have to 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 made the way for small and medium-sized businesses and enterprises (SMBs) + (SMEs) to flourish.

In Recent years, the commercial finance landscape has expanded, Once there was only banks to provide these type of loans. More than 35% of small scale businesses had their loan applications rejected by banks but these new alternatives give fast access to businesses who could not have success in the past.

It means there are better options for everyone out there, whether that means you are a business owner wanting to unlock growth or a customer looking to shop around within a specific market.

What Commercial Finance Options Are There?

There are inumerous commercial finance options available to businesses, but what exactly are they?

Short-term commercial finance:
Trade credit
Business credit cards

Medium-term commercial finance:
Bridging finance Business loans

Long-term commercial finance:
Asset based lending
Invoice factoring
Invoice discounting
Commercial mortgages 

Which Commercial Finance Option Should You Choose?

There is never a one shoe fits all option in life and that is certainly when it comes to commercial finance for businesses, one of the reasons we’re here to help.

It is important to put the time and effort into ensuring you get funding that suits you and your business best. Finding finance should be treated like any other business decision, do the appropriate due diligence, and do contact us if you need extra clarity.

There are few factors to consider before moving ahead with your commercial finance application. You will need to think about the following:

Why do you need finance to begin with?
What industry do you operate in?
The term: how long do you want the loan to last?
How big is your business?
How much money will you need to achieve what you have in mind?
What is your risk profile?
How much can you realistically afford to repay each month?

Once you have seriously contemplated all of these things, you will then understand where your business stands and the type of finance you require should become evident. But again, if you still are not completely sure, get in touch with the experts as this is the exact reason where here for.

This type of Loan can be done is two ways, whether you want to take the debt financing route, or the equity financing is the better option for you.

Equity finance involves giving up a share of your business to an institution in exchange they get a share of your business in return for their investment.

Debt finance comes from a commercial finance company. You will have to pay the loan back, usually with added interest. The majority of commercial finance that is available these days will come in the form of debt financing and means adding a liability to your balance sheet.

So now that you know what is what in the commercial finance world, all that is left to do is weigh up the pros and cons.

The Pros And Cons Of Commercial Finance

Starting with the negatives, some business owners prefer to avoid external commercial finance because they do not want to take on extra debt. Similarly with equity finance, businesses are reluctant to surrender any control or ownership of their business, particularly as if the business is successful the equity will most likely be worth much more than the original loan amount.

However, if you can get past the stigma attached to borrowing for your business, commercial finance can fund growth opportunities and help you to achieve your goals. You can use either the sales ledger or tangible assets as security or to leverage your loan against. When you consider the fact that approximately 60% of SMEs are uncertain about their potential to finance lasting growth, commercial finance is a pretty attractive option for SMEs.

Borrowing money can also help businesses tackle late payments and help to even out cash flow and balance the books. Almost all businesses have times in the month or year where they experience cash flow peaks and troughs, navigating these can be much easier with a funding partner in place. For example, invoice finance is a fantastic way for businesses to access cash that is tied up in unpaid invoices. For many businesses, this is a great and viable option. They often have to provide their customers with credit terms that extend beyond those they are given by their suppliers and invoice finance helps to smooth this gap in cash flow.

In industries with costly equipment set-up costs or where lots of machinery or technology upgrades are required, commercial finance can allow businesses to spread the cost of purchasing over many months. Replacing equipment or getting urgently needed repairs done is often not a choice but a necessity for businesses and commercial finance can help to ease the burden.

Ultimately, you need to ensure that you find finance that fits your business. Different products suit different business life cycle stages and the most important thing to remember is that being proactive, rather than reactive is always best, especially when it comes to finances.

Finding finance before you need it means you can look at the whole picture objectively and select a finance strategy that works for you and your business in its entirety.

For more SME advice and tips, read our related posts below. If you are experiencing cash flow challenges or want to realise your business growth plans, get in touch with our team of Funding Specialists today by email: info@bijouxfinancierllc.com.