Types of Business Funding
Add Alternative Finance Solutions To Your Portfolio
One of the great things about short-term business loans is that they can often work in conjunction with the facilities that you already offer your small business clients. Different types of business funding serve different needs, and each business owner’s needs are unique. By expanding your portfolio to include small business loans from Boost Capital, you can give your broker business a competitive edge whilst offering customized solutions to meet your clients’ needs.
Read on to learn how a short-term business loan can be used with the following types of funding solutions:
- Bank Overdrafts
- Commercial Mortgages
- Development Finance
- Bridging Finance
- Leasing & Asset Finance
- Vehicle Finance
- Factoring & Invoice Discounting
Chances are if your customers are currently using a type of business funding, it’s likely that they are using a bank overdraft. An overdraft is the traditional business financing facility in which a business is able to borrow capital on a bank current account. The business is able to let its account become overdrawn and is charged interest on the amount overdrawn and the length of time it is overdrawn.
While this may be the most common type of business funding, it is becoming increasingly difficult for SMEs to acquire the capital they need. Whether your clients have been rejected outright for an overdraft lending facility or if their limit is insufficient to cover their current plans, a small business loan from Boost Capital can be the ideal funding solution to meet their needs.
Commercial mortgages are typically used for buying a business premise, extending an existing premise, making a residential or commercial investment and/or developing property. Usually commercial mortgage lenders will only take security in the property that you are buying, which is about 70 per cent of the property’s value. Not to mention, business owners will usually need a decent-sized deposit, often requested in cash, which can leave the business strapped for capital with other business operations.
A small business loan from Boost Capital can be used to cushion the cash flow deficit incurred from taking a commercial mortgage so the business owner does not have to worry about keeping his or her business operating. And with shorter terms than most commercial mortgages, our business loan can be paid off before the mortgage term is completed.
Development finance is a type of commercial mortgage that allows a developer to finance the refurbishment of a property. These types of loans are short-term and tend to have higher set-up fees than commercial mortgages.
The renovation or complete build out of a commercial property is expensive and the costs of this type of project can quickly add up. From purchasing new equipment to outfit the newly refurbished premises to paying professionals to complete the project on schedule, a small business loan from Boost Capital can be a viable option to help keep your clients’ cashflow in the green.
A bridging loan is another form of commercial financing. As can be inferred by the name, bridging finance is used to bridge a gap in capital, usually in property development. This type of business funding is designed to help business owners complete the purchase of a property before selling their existing property.
While this type of funding is more short-term than other forms of financing, it is security driven, leaving a business vulnerable to losing assets. Since our funding is unsecured, adding our small business loans to your portfolio will allow you to offer a product to your clients who may not have assets to put up for security.
Leasing & Asset Finance
Leasing and asset finance is the traditional way of funding movable assets, like machinery or office equipment. This type of financing allows businesses to acquire the equipment and assets that they need in order to operate and may not be able to afford otherwise. While leasing and asset finance is less risky than a secured bank loan, for example, some business owners may be required to pay a deposit or make some payments in advance. Or, if they are fortunate enough to avoid a large initial cash outlay, the lease may account for a larger amount of capital over time than if the firm had purchased the asset instead of leasing. Additionally, some businesses might wind up locked into an inflexible medium or long-term agreement that is often difficult to terminate.
Whether your clients need funds for the initial down payment of the lease, require refurbishment to install their new equipment, or need additional unsecured kit to accompany the new equipment, for example, a short-term business loan can be the perfect supplement to leasing and asset finance.
One of the most common types of asset finance is commercial vehicle finance. This type of funding essentially allows a business owner to lease a vehicle or lease a fleet of vehicles for a monthly sum. There are a few different types of commercial vehicle financing schemes, including hire purchase, contract hire, and outright purchase. As with any type of funding, each of these options have their own set of pros and cons.
- A hire purchase is a way to spread the cost of a new vehicle. A business owner is required to put down a deposit and agrees to pay the remainder of the balance with a fixed rate of interest and fixed monthly payments over the agreed-upon term. This type of agreement can often require a three- or six-month deposit, which can be difficult for some business owners to come up with. A small business loan from Boost Capital can help cover the deficit in cashflow left by the initial deposit.
- A contract hire is a great option for a company that will be using the vehicle strictly for business purposes. The monthly lease rate will typically take into account the cost of the car, which includes vehicle registration fees, road fund licence, its period of use and agreed mileage, funding costs and forecast residual value. Many businesses get into trouble with the ‘agreed mileage’ term in the lease. Underestimating mileage can reduce the monthly lease payments at first, but the end result can be excess charges at the end of the term if the agreed total mileage limit has been exceeded. If this happens, a short-term loan from Boost Capital can help to cover the costs of the incurred excess charges.
- Outright purchase, as can be inferred by the name, the purchase of a vehicle or fleet of vehicles using business or borrowed funds for ongoing use in a company’s operations. This method of commercial vehicle finance allows the greatest level of control in terms of the acquiring of the vehicle, however it can require a substantial amount of capital to be tied up during the repayment. Business funding from Boost Capital can provide the capital for the outright purchase or can help to replenish the company funds that are being occupied by the repayment of the vehicle.
Factoring & Invoice Discounting
Invoice factoring and discounting is a popular funding option in which a third party agrees to buy your unpaid invoices for a fee. Business owners who use factoring or invoice discounting are usually able to receive capital within 24 hours of submitting an approved invoice to the financier.
Receiving a specific percentage of a business’s ledger may not add up to enough capital to meet the business owner’s needs. If your clients need more funds than can be made available to them through factoring or invoice discounting, a small business loan from Boost Capital can be the perfect addition to help them meet their business’s needs.
Additionally, some business owners are hesitant to release their full ledger if their financing needs are short-term. If this is the case with your prospects, don’t lose the deal – offer the business a short-term business funding solution from Boost Capital!
Buy-to-let is another type of commercial mortgage. This type of loan is used by those who are looking to purchase a property that they would, in turn, lease out to another. It operates in a very similar way as a home mortgage, except that with buy-to-let, you are not able to borrow as much in terms of loan-to-value.
Many costs go into this business model, and a buy-to-let mortgage may not be able to cover all the expenses. If your customers need to refurbish the premise, buy décor or furniture to furnish the property or if they need cashflow to cover costs like letting agent fees, maintenance, annual safety checks, landlords insurance or rental insurance, a small business loan from Boost Capital could be the perfect accompaniment to a buy-to-let mortgage.
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