Commercial financing, types of commercial financing and where to get help
Commercial financing is an all-encompassing term for various finance products which are designed to help businesses thrive. In the most common sense, commercial financing is used to define a situation where a business puts up its assets that are used to run its operations as collateral for loans.
It is almost impossible to expand and grow businesses without taking loans in this current day and age it is therefore important for business owners to understand this term and its types so they can make the right choices on which type of commercial financing would be most suitable for their businesses.
In this post we will look at the different types of commercial financing that exist in terms of periods of payback allowed. We will also categorize them all into two major groups which will be explained in brief details. Read on to learn more.
Types of Commercial Financing
In this post we will look at the different types of commercial financing that exist in terms of periods of payback allowed. We will also categorize them all into two major groups which will be explained in brief details. Read on to learn more.
Types of Commercial Financing
In addition to the popular asset-based explained above, there are multiple options available for commercial funding. Most commercial funding plans are alike with private loan systems. For example, the homeowner’s loan is structured pretty much the same way as the commercial mortgage while the case is same for business loans and personal loans.
In terms of allowance period, we have short-term loans, medium term, and long-term loans. Under the short term, we have the Overdrafts, Business credit cards, Trade credit, Invoice factoring, and Invoice Discounting. Now coming under the medium term we have Bridging finance, Crowd funding, Peer-to-peer lending, Equipment leasing, while the Long-term group consists of Commercial mortgages, Business loans, and Asset-based lending.
The two major groups mentioned earlier are Debt Financing and Equity Financing.
Debt financing is the major form of funding used by a lot of people. This process involves a business owner who lends money in form of a loan to be paid back at a certain date in the future and at a particular interest rate. The lenders here may be banks, individuals or other financial institutions like insurance companies.
Equity Financing is when the lender of the money turns the money into an investment in which he does not wish to be paid back in cash but in shares in the company’s equity. This makes him have a say in the running of the business and of course shares in the profit. Private investors or venture capitalists are major sources of such funds. A family member or friend may decide to buy in ownership shares if they see an admirable growth pattern that requires their money as capital.
How do you determine what option is best for your business?
Every business owner is eligible for a commercial loan but knowing the right choice for your business usually requires consideration of many factors.
Generally most business owners like to keep their profit sharing to the minimum number of people while others like to stay in control of their business this makes debt financing very popular. But it is not always the right choice for every business. It is wise to employ the services of Finance Brokers in Mt. Waverley or Glen Waverley
If you are a business owner in Australia with the need for commercial loans then contact Opulent Finance today. We have qualified Commercial Finance Brokers in Melbourne, Mt. Waverley and Glen Waverley who are ready to get you the best deal that is just right for your business.
