For many small businesses, commercial financing will mean the difference between taking advantage of an opportunity, or missing out. Commercial financing consists of loans for businesses that can be used to purchase real estate, equipment, or even to buy out another business. On a day-to-day level, commercial finance is important for payroll and other routine functions. Sooner or later, virtually every business will have an opportunity for growth that relies on commercial finance. Will your small business be ready?
One exciting type of commercial finance is invoice discounting. With invoice discounting you could improve your cash flows significantly and have cash in place of receivables within a day or two. Instead of waiting 30 or 60 days to be paid, you send invoices as usual – as far as your customers are concerned, who will see no change – except that an online system at your bank records the invoices and sends you 90% of the value right away. Since it’s a rotating system as you continue rolling receivables over into cash, you don’t have to worry about repayment and have ready access to capital for ongoing financing needs such as payroll or renting space. This is all transparent to your customers, who will not know you received the cash for the debs long before they paid.
Commercial finance also includes asset-based lending for infrequent expenses such as purchasing a property, business equipment, vehicles, and machinery of all types. From the start-up looking to fund their essential expenses to large businesses buying out a competitor, commercial finance is key to business growth. Oftentimes, these loans will require collateral such as your existing equipment or property. This asset-based lending allows you to leverage the materials in the business you’ve already built to continue growing.
So how can you prepare your business for future growth opportunities and ensure you’re able to receive the commercial financing you need? You’ll want to put together a package of the last several years’ financial data – up to three-to-five, if you’ve been in business that long – including financial statements, leasing agreements, tax returns, etc. If you don’t have much of a business track record, you may need to show your personal finance documents as the small business owner. When the time comes to apply for your commercial financing, be sure to sell your story . Demonstrate how this financing solution will help you grow, resulting in a win-win for your business and the lender. Everyone wants to be part of a future success story.
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Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.Businesses need cash to operate day-to-day and to grow to new heights. Commercial finance holds the keys to both. For daily operations, invoice discounting cab turn receivables into cash for current operating expense. They can even contribute to growth opportunities where you would otherwise be tied up waiting for customers to pay. And for the big growth opportunities, loans can allow you to purchase anything from desk chairs to a manufacturing plant – whatever it takes for you to move to the next level.
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