What are the different types of commercial finance available?

By Leo Rodino
In Commercial Loans, Real Estate

There are a variety of commercial loans available. These include short and long-term loans, unsecured or secured against real estate property, equipment or other assets. Loans can also be tailored according to the type of customer, for example small and medium enterprises (SME) or corporates and self-managed super funds (SMSF) are also specialised by industry sectors.

The following is a summary of the main options available:

  • Business Term Loans: A business loan is set at a specific term, with regular repayments that can include principal and interest an also interest only for a limited time. They are normally applied to invest or expand the business. They can be set at short to medium term and be either unsecured or secured against real estate property, equipment or other assets. These loans also offer fixed or variable interest rates.
  • Commercial Property Loans: To purchase real estate property for investment. They are normally long term, and offer fixed or variable interest rates, with repayment options at principal and interest or interest only.
  • Commercial Overdraft: With an approved ongoing credit limit, an overdraft helps the business manage fluctuating cash flows and assists in a variety of common business situations and does not require minimum regular repayments as long as the balance owing is within the maximum credit limit. A commercial overdraft can be unsecured or secured by a mortgage over residential, commercial, or other types of security.
  • Cash Flow Finance:
    • Invoice Discounting: This type of finance facility assists with working capital finance requirements by accelerating the cash conversion cycle. It is especially useful for businesses experiencing strong growth or with seasonal requirements.
    • Trade Finance: This is a product suited for companies involved in domestic or international trade. The customer can draw funds to pay for an order placed on a supplier, with the repayment set at a specific term in days, which will match the time when they expect to receive payment from their customer.
  • SMSF Loans: To finance residential or commercial properties acquired by a self-managed super fund.
  • Equipment Finance: To fund the purchase of motor vehicles and other equipment utilised for business purposes.
  • Bank Bills: A Bank Bill is an unconditional written order by one party addressed to a Bank to pay a fixed sum (the bill’s face value) at a fixed set date to the Bank. The term of the Bill may be renegotiated by drawing a fresh Bank Bill for an agreed number of days at each rollover.

Banks and non-bank lenders also offer products tailored or targeted specifically to different business sectors. The list of industries will vary from lender to lender depending on the credit appetite and policy at the time of application. Some examples of industry sectors are: supermarkets, accountants, solicitors and other professionals, management rights, child care centres, medical practitioners, rent rolls, hospitality, property sector, manufacturing, wholesale and franchising.

We are available for a no obligation chat to discuss these and other business lending options that may suit your requirements. Please give us a call for an appointment.