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7 Ways to finance a business

PUBLISHED ON: 16/12/2023

The business finance market offers a range of different funding methods, from ‘traditional’ business loans to flexible alternative options that target a business’s specific needs. So take a look at these seven different ways that you could use to finance your business.

1.      Unsecured loans

Unsecured business loans are relatively quick to obtain because they don’t require an asset to be put forward as security – they’re based on creditworthiness. Unsecured loans are typically used to support working capital or business growth and can be a good option for businesses with few assets.

2.      Secured loans

A secured business loan requires one or more assets to be provided as collateral for the lender. This reduces the lender’s risk as they can repossess the asset(s) if your business is unable to repay. Eligibility doesn’t rely on creditworthiness and lower interest rates are commonly available due to the lender’s lowered risk.

3.      Invoice finance

Invoice finance incorporates a range of products including factoring, invoice discounting, and single invoice finance, and leverages the value of your unpaid invoices. You can typically obtain around 90 per cent of each unpaid invoice within around 24-48 hours, which offers your business a steady flow of cash throughout each month.

4.      Vehicle finance

Vehicle finance allows you to protect your business capital by taking out a hire purchase or a lease agreement whereby you repay fixed monthly amounts over a set term. Hire purchase enables you to own the vehicle once a final ‘completion’ payment is made at the end of the agreement. Finance leases also offer flexibility once the lease has ended – this might include upgrading your vehicle using a new lease or extending the existing lease.

5.      Asset refinance

If your business owns expensive assets you can leverage their value using asset refinance. It involves a lender buying the asset from you, which provides a significant lump sum to use in your business. You then repay the lender at a fixed rate under a ‘sale and leaseback’ arrangement and ultimately retake ownership once all the repayments are made.

6.      Revolving credit

Revolving credit is a flexible short-term form of working capital finance that can be used like a bank overdraft. A fixed amount of credit is offered by the lender - this must be repaid within 12 months but you can use the facility, and repay it, as many times as you need within this time limit.

7.      Commercial property finance

You can finance the purchase of your business premises through a commercial mortgage, which is a long-term loan similar in structure to a residential mortgage. Lenders typically require a deposit of around 25 per cent. You can also use commercial property finance to become a landlord and rent the premises to other businesses.

For more help to find the best type of finance for your business, please get in touch with our team at UK Business Finance. We’re commercial finance brokers with extensive industry experience and work from offices around the country.

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