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Understanding commercial finance

Most businesses will need access to commercial finance at some stage. Very few firms have the kind of cash flow that means that they never have to borrow money. The majority of companies have to borrow if they want to take advantage of new opportunities to grow.

The drawbacks of traditional commercial finance

In the past, when a firm wanted to borrow some money, it had little choice but to do so via a bank or other traditional financial institution. For some, this is still an option, but many of these sources require a full business plan before they will consider lending any money.

In addition, it can be quite some time before a decision is made about whether to lend or not. Unfortunately, in today’s fast moving world, this can present problems as opportunities can be missed – there are few suppliers which would be willing to sit and wait to complete an order for a large contract. These days, firms need to know almost instantly if their loan will be approved or not, and they often require the money in their account within days rather than weeks if they are not to miss out on lucrative business contracts.

Alternative forms of commercial finance

Fortunately, there are alternative forms of commercial financing available. It is now possible for even small businesses to use their assets as collateral to enable them to borrow money quickly.

Most business owners will be aware that they can use their company property to support a loan. However, not everyone realises that other assets can also be used if a building isn’t owned.

It is possible for firms to borrow money using their customers’ outstanding invoices as collateral. There are two main ways to do this – either invoice factoring or invoice discounting.

Firms can also potentially use their machinery, raw products, and even unfinished products.

The amount which can be borrowed depends on the product that is used, but with invoice factoring, it is possible to receive a cash injection worth up to 90 per cent of the value of the invoice. This means that large sums of money can be raised within a short period of time.

These loans are normally short-term. However, if a firm still needs money once the loans have been paid off, a new round of loans can be arranged almost immediately. These alternative commercial loan products are amazingly flexible.

The other great thing about these types of financing is the fact that virtually any firm can benefit from them. A company’s credit rating is not normally an issue. The decision making process is very fast, and once the loan has been agreed, the money arrives very quickly.

To find out more about the commercial finance options we offer at Invoice Finance Scotland, give us a call today. We have helped hundreds of firms to get the money they need quickly and at a reasonable cost, and our expert team is on hand to help you too.

IFS Guide
IFS Presentation
NACFB - Helping Fund UK Businesses  Federation of Small Business