Commercial loans and commercial finance

Commercial finance is lending that’s designed for commercial businesses rather than personal or individuals. It’s another term for business funding or business finance and comes in a range of different finance facilities.  Originally, commercial finance would have come from mainstream lenders such as high street banks, but nowadays there is a variety of challenger banks, large independent or niche AltFi providers too.  

Get a commercial loan

Commercial loans and commercial finance

If you’re looking for commercial growth for your business or want to understand what kind of funding would be available to your business, find out more about commercial finance and commercial loans here. 

What are the benefits of commercial loans?

Commercial loans are a great option for businesses looking to grow or invest in assets such as a fleet of vehicles or even more staff.

Some other benefits of commercial loans are;

  • Funding a new contract

  • International expansion

  • Turnarounds and pre-packs

Who can offer commercial business loans?

For smaller business loans, major banks are more likely to compete directly with each other to lend to you. Commercial business loans often have a broader range of challenger banks and independent lenders who compete on speed, service, and flexibility.

Types of commercial finance

The simplest form of commercial finance is a commercial loan or commercial business loan. You agree on an amount, a repayment period and the cost of finance (for example, the interest rate and fees).

Commercial loans can be secured or unsecured loans. Secured loans are usually cheaper because the lender is taking a lower risk, but you need to have assets to use as security. Unsecured loans are useful for companies that don’t have enough assets to get a secured loan.

Commercial loans can come from a variety of sources. They are offered by mainstream banks, challenger banks, and specialist independent lenders, as well as peer-to-peer lending platforms.

How do commercial loans work?

The loan terms associated with commercial loans are slightly different to standard business loans. Lenders are more likely to take a bespoke view of your business and tailor the finance to your own needs.

Typically commercial finance combines two or more financial products to help meet the desired loan amount. An example would be using a term loan for capital to grow, alongside another kind of commercial lending to help with working capital finance. In this example, you can equip your business with two types of commercial loans, one for cash flow stability and the other for long-term growth.

Small business commercial loans

Smaller businesses, particularly sole traders and partnerships, will often choose small business loans as their favoured option. Small business loans are similar in that they enable businesses to realise their growth plans and can be over a short or longer-term too. 

Small business commercial loans are often for a smaller amount of money, usually up to £25,000, and will usually have a shorter repayment term. Some examples of small business loans include:

  • Bridging loans

  • Crowdfunding

  • Commercial mortgages 

How do small business commercial loans work

As with all loans, commercial loans have certain requirements a lender will need your business to meet. This is often in the form of assets offered as security and some examples offered for a secure commercial loan are:

  • Property

  • Vehicles

  • Shares or a stake in the business

The lender may also negotiate on the term of your loan if your business is looking to borrow a larger amount of money compared to the assets you can offer.

Other types of commercial finance

Commercial finance types are extremely varied. The first way to compare commercial finance products is by seeing whether or not they require security (or ‘collateral’).

Secured commercial finance is backed by property or assets, which could range from commercial property and business equipment to the personal home of the business owner.

Alternatively, unsecured commercial finance doesn’t require security, but because the risk is higher for the lender they will look closely at your credit rating and may require a personal guarantee.

The world of commercial loans and commercial finance is more varied than ever, and it's hard for businesses to know where to start. If you're looking for a commercial loan, we can help you find the right one to suit your business needs. Our Business Finance Specialists can discuss different types of commercial finance from over 120 lenders on our panel.

Asset finance

A major type of commercial finance is asset finance which refers to both funding to acquire assets, and funding backed by existing assets.

Asset finance is a wide area — it might mean equipment finance and plant machinery finance, but it could also refer to asset refinance.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Invoice finance and other receivables finance

Invoice finance is a popular form of commercial finance, used by businesses that trade on credit. It’s a simple idea — the lender advances you cash based on your unpaid invoices — but there are lots of variations that suit different business situations.

Discounting is arguably the simplest form, where you deal directly with the lender and carry on with your customers as normal. Factoring, on the other hand, also includes credit control, so your customers deal with the lender and the lender ensures prompt payment of invoices.

Selective invoice finance is similar to either of the above, but you specify individual invoices rather than financing the whole sales ledger. Whilst supply chain finance and trade finance are in the same vein but designed for wholesalers and businesses that trade internationally.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Commercial property finance

Another area of commercial finance is property finance and this includes commercial mortgages. Both commercial mortgages and property development finance, are typically designed for developers looking to expand their property portfolio.

You could also consider auction finance to be a type of commercial finance — although it can be available to individuals, it’s also suitable for property developers and buy-to-let limited companies.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Specialist commercial finance

One of the best things about the rise of alternative finance is the breadth of specialist lenders and products on the market now.

An example of specialist finance being created would be financing for eCommerce - ideal for companies selling online, or merchant cash advances - a type of unsecured commercial finance that’s popular with the retail and hospitality sectors.

You can even get commercial finance for a franchise, or unlock it from your personal pension.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options