What is the difference between corporate finance and commercial finance?

Understanding corporate finance and commercial finance

Corporate finance and commercial finance are two similar terms that are often used synonymously. They are two completely different areas of finance, however, and both offer the opportunity for organisations to grow and change.

How does corporate finance differ from commercial finance?

Corporate finance focuses on areas such as the buying and selling of businesses, mergers and acquisitions (M&As), and management buyouts (MBOs) and management buy-ins (MBIs).

Commercial finance offers funding solutions that help limited companies and other businesses to purchase assets for use within the business, boost working capital, or implement growth plans.

Examples of corporate finance

To give you a further insight into how the two terms differ, here are some examples of corporate finance transactions and commercial finance solutions in a little more detail.

Mergers and acquisitions

A merger occurs when two existing companies combine to form a new company. Acquisitions take place when one company targets another and purchases the majority or all of its shares.

MBOs and MBIs

Management buy-outs involve a company’s existing management team purchasing the business. A management buy-in, on the other hand, takes place when an external management team buys the business.

Occasionally, these two types of corporate finance are combined – if the current team of managers lack experience in certain areas, for example, and need to be bolstered by outside expertise.

Commercial finance examples

Unsecured business loans

Unsecured commercial loans enable businesses to fund asset purchases or carry out strategic plans. This type of lending doesn’t require any assets to be put forward to the lender as collateral, making them a flexible and relatively easy form of funding to access.

Invoice finance

Invoice finance uses the value of a business’s unpaid invoices to provide a regular source of working capital. Again, it’s easy to access for businesses with a strong sales ledger, and eligibility doesn’t rely on credit score.

Asset finance

Asset finance includes different types of funding agreements, including hire purchase and leasing. One of its main advantages is that it facilitates the purchase of assets without a business having to use up valuable capital.

As you can see, commercial finance focuses on providing the funding at an operational and growth level, whereas corporate finance typically involves higher level deals and transactions such as business sales and acquisitions.

Using our industry contacts, UK Business Finance can provide further guidance if your plans lie more within the corporate finance realm. If you’re looking for commercial finance for your business, however, we can also provide professional expertise and support.

We’re experienced commercial finance brokers and will ensure you choose the best type of funding for your needs. With such an extensive choice of alternative lending options now available, it’s crucial that you’re aware of all your options.

We search the whole of the market to find the best quotes, and can make an application on your behalf. Please get in touch with one of the team to find out more – we work from offices around the country.