commercial construction

The best ways commercial finance can help your business grow is by leveraging the right commercial lending to acquire business assets including property, equipment, machinery and the right people to generate more income and scale efficiency to help your business expand.  This approach coupled with the right working capital solutions, like an overdraft to support your day to day operations, allows you to improve your net position over time and grow your business income.  

In this article, we’ll break down the various loan solutions available to you, focusing on lending solutions for growth and income, and commercial lending for working capital solutions and cash flow.

Lending for Growth and Income

Commercial lending is used by many business owners to take advantage of opportunities for growth with a view to building their net assets and income over time.  Some of the common loan types include:

Commercial Property Loans

Commercial property loans are used to purchase a range of commercial property types and some residential investment property types.  A block of 4 residential units on 1 title is a good example of a residential investment property requiring a commercial loan.  

The commercial lending process for this type of loan could be a full doc, low doc or no doc solution depending on the loan to value ratio (LVR), the chosen lender’s policy and the credit rating of the borrower. 

Commercial property loans are available from major banks, second tier lenders and alternative lenders like those offering private loans and second mortgages.

Property Backed Loans and Unsecured Loans for Business Investment

It’s common to raise capital to put a business strategy into action and business owners can use either unsecured loans to do this or they can raise capital against the equity they own in property.

The benefit of Unsecured Loans is their speed and they’re one of the fastest commercial loans Australia.  Same day funding is available from some lenders with a genuine no doc application process for loans up to $500,000.

The benefit of a secured loan is their rates are usually lower than an unsecured loan.  As with commercial property loans there are a wide variety of lenders offering loans secured by property supporting strong borrowers through to those with bad credit.

Equipment Finance and Asset Finance

Equipment finance, also known as asset finance, is used to purchase assets that will generate income or improve operating efficiency within a business. This type of loan is secured against the equipment or asset itself and is a popular option for businesses in need of new machinery or vehicles.

Startup finance is available to new businesses as well as those with strong profitability over time.  

Property Development Finance and Construction Loans

Property development finance and construction loans do exactly what they sound like. These loans are typically secured against the property itself and can cover everything from land acquisition to building costs.

The commercial lending process for property development loans seeks to understand the project has a sufficient margin and the key stakeholders have the right skillset to complete the project within the proposed loan term.  Commercial valuations and a QS Report are key features of the lending process.

Whilst major banks are more conservative with the lending for property development there are a range of specialist lenders with streamlined processes who can support property developers with funding for their projects.

Click here to speak to an expert about your property development and construction loan.

Lending for Working Capital and Cash Flow

Whilst business owners need business finance to scale their income and growth, you also need access to financing options that support day-to-day cash flow needs. 

Here are some of the loan solutions for cash flow and working capital solutions:

Business Lines of Credit and Overdrafts

An overdraft is a business line of credit offering support to managing cash flow. An overdraft allows you to draw on a predetermined amount of credit as needed, and you only pay interest on the amount you borrow.  As you repay the credit that amount then becomes available again for you to access.

Unsecured Term Loans

Unsecured term loans are designed for businesses in need of longer-term financing options. These loans do not require property security but may have higher interest rates.

Invoice Financing

Invoice financing, also known as debtor financing or factoring, is a type of loan that allows you to get paid on your invoices the day you write them. It can help improve cash flow by bringing revenue recognition forward.

Trade and Import Finance

Trade and import finance can help your business pay for material supplies and extend supplier terms. It can also support you through your sales cycle by providing financing for the purchase of goods or services.

We’ve had great success helping business owners import machinery and equipment not available in Australia using a combination of equipment finance with import finance.

Private Loans

Private loans are designed for business owners who may not be able to get a loan from traditional lenders due to bad credit or other factors. These loans are typically more flexible and offer lower documentation requirements.

Applying for a Commercial Loan

When it comes to applying for a commercial loan, it’s important to understand the loan application process. This can vary depending on the lender and the type of commercial finance loan you’re applying for. If you’re applying at a bank you’ll need to provide documentation that outlines your business’s financial history, including your revenue and expenses, assets, liabilities, and credit history. If using an unsecured lender or a fintech lender assessments will be more likely made via an assessment of your business bank account.  Private lenders will generally seek a valuation of your property and a sound exit strategy when determining the suitability of your application.

Final Thoughts

It is clear that commercial finance can be a valuable tool for small business owners looking to grow their operations. By leveraging commercial finance lending solutions such as secured and unsecured loans, equipment finance, and development finance, businesses can access the capital needed to invest in income-generating assets and properties, as well as to support day-to-day cash flow needs. Additionally, financing options like invoice financing, trade finance, and unsecured business loans can provide businesses with the flexibility they need to manage their operations and take advantage of opportunities as they arise.
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