Commercial Funding
Numerous individuals turn to online searches for terms like “commercial funding Australia”, as these searches offer potential avenues for accessing much-needed business loans.
These funds may serve various purposes, from consolidating debt and covering unexpected expenses to purchasing assets and machinery. Research states that about one in four small businesses intend to borrow for their next growth phase.
The thing is, traditional lenders often subject applicants to lengthy waiting periods and stringent requirements that small businesses may be unable to meet.
Let’s look at how commercial funding works, what lenders offer for different financing needs, and how we can bridge the funding gap for borrowers in Australia.
What is commercial funding?
Commercial funding is a long-term financing that offers a diverse array of options tailored to meet business needs. Businesses usually opt for financing because of these reasons: smoothing over cash flow or working capital (50%), purchasing stock or inventory (25%), and purchasing equipment (25%).
Small businesses overall appear optimistic about growth prospects – as high as 81% of surveyed anticipate growth in the next 12 months. And commercial funding is an essential component of growth no matter the capital needs.
There are a variety of reasons for getting a commercial loan. You may need to hire more staff, buy new equipment, install security systems, and purchase commercial space for industrial or retail. As with other loans, commercial funding would entail showing what the funds are for and how they will impact your business’s bottom line. Lenders look at the numbers before giving the go-ahead on the loan.
What are the types of commercial funding?
Lenders may vary in what types of commercial loans they offer, but here are a few to expect when scouting for financing:
Construction finance
Want to solidify your growth? Construction finance is a specialized form of commercial funding designed to support property developers, builders, and contractors. It provides the necessary capital for land acquisition, construction costs, and related expenses. This type of funding is instrumental in turning real estate visions into tangible structures that contribute to economic growth and development.
Invoice finance
Invoice finance and factoring offer a lifeline to businesses facing cash flow challenges due to unpaid invoices. These solutions allow businesses to access a portion of the funds tied up in outstanding invoices, providing much-needed working capital to cover operational expenses, pay suppliers, and invest in growth initiatives.
Equipment and industrial property finance
Businesses often require specialized equipment and industrial properties to function efficiently. Equipment and industrial property finance provide the means to acquire machinery, vehicles, technology, and real estate assets critical to day-to-day operations. This funding avenue enables businesses to remain competitive and enhance productivity.
Franchise finance
Franchise finance supports entrepreneur’s aspirations to become franchisees. This loan offers the necessary funds to purchase and operate a franchise business. This type of funding recognizes the potential of established franchise models and empowers individuals to step into successful business ventures under recognized brands.
Mezzanine finance
Mezzanine finance bridges the gap between senior debt and equity financing. It provides additional capital to businesses seeking to expand, acquire new assets, or execute strategic initiatives. This form of financing is often used to capitalize on growth opportunities without diluting existing ownership.
Vehicle finance
Vehicle finance addresses the need for commercial vehicles, ranging from delivery trucks to company cars. This funding option assists businesses in acquiring and maintaining a fleet of vehicles necessary for efficient operations and customer service.
Subprime loans
Subprime loans extend financing to businesses with diverse credit profiles, or those that might not meet traditional lending standards. These loans offer a pathway for businesses facing credit challenges to access capital and fuel growth, making them a critical tool for fostering entrepreneurship. However, be prepared for higher rates compared to a prime rate loan.
Who qualifies for commercial funding?
Here are the eligibility requirements when applying for commercial loans:
· The business makes a minimum gross annual turnover of $100,000
· Operational for at least one year
· Present at least three months of bank statements
· No prior or recent bankruptcy
· Minimum business credit score of 500
Commercial loan terms usually range from 6 to 24 months, depending on the loan amount and your specific financial position. Let our business loan professionals help you navigate the process of searching for loans and preparing documents when applying. Give us a call today to learn more.
How to apply for commercial funding
Lenders offer a range of business loan options that may elevate your business operations. You can consult our Intellichoice business loan professionals to get a full insight on what bank products fit with your financing needs.
Prepare these documents to get started:
· You are an active ABN holder
· Type of financing + plan showing how the financing will be used for business purposes
· Valid ID (e.g., passport, Medicare card, driver’s licence)
· Bank statements
· Accountant letter confirming business activity
· Income tax report
You can use our Commercial Loan Calculator to determine what are the figures you can work with depending on your business and financial situation. Our tools are free and accurate, so simply fill in your details and get the necessary information.
Top considerations before applying for commercial funding
Assessment of needs – Clearly define the purpose of the funding and the specific financial requirements of your business. Different funding types cater to distinct needs, so align your choice with your business goals.
Financial preparedness – Ensure your financial documents, including financial statements, tax records, and credit history, are organized and up to date. Lenders will use these documents to evaluate your eligibility.
Repayment plan – Have a clear repayment plan in place, focusing on the terms and conditions of the funding. A realistic repayment strategy demonstrates your commitment to meeting your financial obligations without putting a strain on your business capital.
Funding terms and rates – Thoroughly understand the terms, interest rates, fees, and repayment schedules associated with the chosen funding option. This clarity prevents surprises down the line. Working with a loan specialist can make the nuanced fine print more understandable.
Lender evaluation – Research and evaluate potential lenders. Look for reputable institutions that align with your business’s values and goals. Don’t just focus on lower rates, but mull over the features and the lender’s reliability.
Need commercial funding? Whatever sector you belong to, Intellichoice is here to broker a suitable loan from a network of banks and specialist lenders. We make the application process seamless by assisting in preparing documents and finding the right fit for your business. Here, you will have access to expert advice and exceptional customer support. Contact us – let’s get started today.
