Business loans are generally taken out for various reasons. Most commonly the purpose of taking out business loans are:

Expanding operations by purchasing additional real estate: If you want to purchase real estate as part of your business expansion plans. Lenders generally look at if your business is turning profits, trend of cash flow (rising) and overall positive business outlook. Such loans for real estate are usually in the form of a mortgage. In most cases a collateral is required for securing a loan and repayments can be monthly or quarterly Stocking up on inventory to avoid lead times esp. for businesses seasonal in natureSome businesses are seasonal in nature e.g. retail, hospitality, agricultural businesses etc. If a company makes most of its sales during the holiday season, they can take out a short-term loan to purchase most of their inventory in advance. Many businesses do this to beat lead times on inventory supply chain and ease of cash flow. Loans to purchase inventory are generally short-term in nature; companies strategize around repaying them once then season is over, using proceeds from their seasonal revenue.

Access to additional working capital-Working capital is the money used to manage day-to-day business operations. Businesses may take out a loan to satisfy operational costs until their earnings reach a certain revenue level or volume. Working capital loans generally have a higher interest rate than real estate loans because of higher risk.

Upgrading or purchasing equipment- If your business is looking at either upgrading or buying new equipment or leasing them, you can sign up for a business loan. A cost-benefit analysis is necessary to determine whether it’s better to buy or to lease, which is generally is part of the documentation when applying for a loan. Such loans generally have a term of less than three years. Repayment will often be tied directly to the useful life of the equipment being financed.

Types of equipment Financing

Hire Purchase

A commercial hire purchase is a commercial finance loan where you hire vehicle or equipment for your business purposes. This means that you will benefit from such arrangement when you don’t need to purchase the asset outright or own the asset immediately but can still generate income from its use. There are many tax incentives for such loans and terms of the loan can vary.

Finance lease

A finance lease is a form of finance (generally meant for car or equipment), that allows business owners to purchase / lease a vehicle (commercial vehicle) for the use of your business i.e. day to day running of business.

Chattel mortgage

A chattel mortgage is a business loan product that’s commonly used for equipment financing. With a chattel mortgage, a lender provides your business with cash in the form of a loan to purchase the equipment, and this equipment is then used as collateral for the life of the loan.

Business loans are generally either secured or unsecured. Business loans function similar to other loan products. If approved, the lender will provide finance to assist with your business’s working capital or the purchasing of an asset, and you’ll be charged either a fixed or variable interest rate over the loan term.

Benefit/s of a commercial / business loan

Achieve cost efficiencies

To produce more with less cost, bigger and better equipment or advance purchase of inventory or just having access to more working capital can help your business increase revenues and ultimately profits.

Freeing up capital / reducing upfront costs

A vehicle or equipment essential for running of your business can be an upfront cost. By opting for an asset finance loan, you are able to free up working capital, which can be diverted to other essential activities of running your business.

Depreciation costs / tax incentives

Purchasing / leasing a vehicle or equipment using an asset finance loan can help you save on deprecation costs and / or give tax incentives to your business.

Be more competitive

Upgrade to equipment / being equipped with adequate inventory / access to additional cash (capital) can all further help in your business to be more competitive.

Can Sure Finance help secure a commercial / business loan?

At Sure Finance we will utilize our years of experience and expertise in helping you assess the correct purpose of the commercial / business loan, choose the right product and facilitate the loan application to funding process.

FAQs

What are some different types of business loan products?

Line of Credit / Overdraft- A business line of credit / overdraft facility, is a type of loan that allows you to draw against an agreed amount of funds when you need to. The agreed amount is your approved credit limit. Once your business has a line of credit facility in place, you can access these funds when you choose, without having to get approval or apply again

Unsecured business loan- With an unsecured loan, you’re able to secure financing for your business without using an asset as collateral. Because you’re not borrowing against an asset, the lender will typically assess your business’ cash flows, trading history, and creditworthiness as part of your application.

Secured business loan- Secured business loans are generally provided for a fixed period of time and require a physical asset to be served as collateral for the loan. Examples of a secured asset include residential and commercial property, vehicles, and equipment.

Commercial and Business Loans