Commercial Finance

A quick overview of Commercial Finance

Commercial finance is a broad term covering a range of funding solutions designed specifically for business needs. It is generally categorized into three main pillars: Debt Finance (borrowing money), Asset-Based Finance (using physical or financial assets as security), and Equity Finance (selling shares).

Whether you’re a startup looking for initial capital or an established firm planning a major acquisition, commercial finance provides the fuel for growth. You can find out more in our guide to commercial finance.

How to choose the right type of commercial finance

Commercial finance is assessed based on the health and potential of your business rather than just your personal income. Lenders look at your trading history, business plan, and the specific assets being financed. The type of borrowing that will suit your needs depends on the type and turnover of your business, as well as what you need the funds for:

• Traditional debt finance

  • Business Loans Secured & Unsecured: The most common form of finance, used for growth or one-off investments

  • Start-up Loans: Government-backed personal loans specifically for entrepreneurs starting a new business (usually up to £25,000).

• Asset & Invoice Finance

  • Asset Finance (Hire Purchase & Leasing): Used to acquire machinery, vehicles, or IT equipment by spreading the cost over its useful life

  • Asset Refinancing: Borrowing against assets you already own to release equity back into the business

  • Invoice Factoring: The lender manages your sales ledger and collects payments from your customers directly

  • Invoice Discounting: Similar to factoring, but you maintain control over your own sales ledger and collections

  • Stock Finance: Using your current inventory as collateral to secure a revolving line of credit

• Property & Development Finance

  • Commercial Mortgages: Long-term loans used to buy or refinance trading premises or investment properties.

  • Bridging Loans: Fast, short-term funding used to "bridge" a gap (e.g., buying at auction before a mortgage is ready).

  • Development Finance: Staged funding used for the construction or heavy refurbishment of property.

  • Mezzanine Finance: A hybrid of debt and equity, often used in large property deals to fill the gap between a primary mortgage and the borrower's deposit.

• Specialized & Alternative Finance

  • Merchant Cash Advance (MCA): An advance based on your future credit/debit card sales. You repay a percentage of your daily takings

  • Trade Finance: Used by importers and exporters to fund the gap between buying goods and receiving payment from customers

  • VAT Loans: Short-term loans (usually 3–12 months) specifically to cover quarterly VAT bills and preserve cash flow

  • Peer-to-Peer (P2P) Lending: Borrowing from a pool of individual investors through an online platform

  • Crowdfunding: Raising small amounts of money from a large number of people, usually via the internet

• Equity Finance

  • Angel Investment: Wealthy individuals (Angels) who provide capital and often mentorship to early-stage businesses

  • Venture Capital: Large investment firms that provide significant funding to high-growth startups in exchange for equity