Commercial Finance is Changing – Here’s What you Need to Know
Most people, especially “first time buyers,” tend to think only in terms of approaching their own banks when it comes to arranging finance. But there are a bunch of other options that people forget to consider, like commercial mortgage lenders, asset finance lenders, lenders that specialize in factoring/invoice discounting, lenders that can provide finance based on existing pensions, refinancing of existing commercial finance and much more.
Consider Security & Credit History
For large commercial loans, commercial finance lenders usually require land and buildings as security for the loan. In the current economic climate, it is very difficult to get finance for more than 70% of the value of the loan – although in a very limited number of cases – not impossible! If you are looking for more than 70% - be prepared to look for other alternatives. For smaller business loans, vehicles, plant, equipment etc. may be acceptable. Some lenders even allow you to refinance equipment that you already own (say a car) thereby enabling you to release capital into your business.
It’s also important to know your credit history. Knowing this information will help you understand what sort of interest rate you’d be looking at for a loan. If your credit history is not perfect (and in this current credit crunch very little is being seen as perfect credit history) you may need to be applying to a specialist commercial finance lender.
The government provides various grants for businesses. Some of the most common are under the small Firms Loan Guarantee Schemes (which are easy to set up). 75% of risk is taken by government and provides another way of introducing vital growth capital to small businesses. This option is not available if there is existing potential security such as high equity in property where a secured loan could be setup.
As prepaid is becoming more popular in the retail realms, it’s starting to trickle into the commercial atmosphere as well. Using a prepaid card might seem like a radical decision, but in reality, it can be one of the safer options because it doesn’t rely on credit, and usually there are no late payments or penalties. Prepaid is also a great way to help with cash flow, one of the biggest issues small businesses have.