How Commercial Finance Companies Sanction Loans
Commercial finance companies are the special type of financial institutions which provides business loans instead of common consumer loans. The SMEs or small business houses borrow money from these financial institutions for purchasing equipment and inventory. These lenders act as the most helpful resources for the business organizations that have satisfactory guarantee to support a loan. Also these loan sanctioning agents help the business to grow through opening a window for inventory financing and accounts receivable. The manufacturing companies or wholesaling business show more interest to deal with commercial finance companies as they are completely secure.
The established businesses get loans from the commercial finance companies easily as they have sufficient commercial assets. Mostly these lenders targetthebetter performing business organizations instead of startups with low commercial assets. You can find that most of the approachingclients’havegot their applications rejected or delayed for undefined time at established banks.
Advantages:
1. It offers loans to the clients with less regulation (but the banks feel more conservative in sanctioning small business loans).
2. Commercial finance companiesknow how to absolve more risk (which is prevented through traditional banking rules).
3. Loans come with flexibility in lending terms.
4. Both short-term and long-term loans are available.
5. The best source to get asset-backed loans even your business is previously leveraged.
Disadvantages:
1. Generally commercial finance companies sanction only extremely guaranteed loans. Additionally, the security for the loan is strongly assessed for liquidity and value. Assets have to be easily accessible and saleable. Usual collateral lists inventory, equipment, or accounts receivable of the businesses.
2. As the loan is possibly riskier, the lender generally charges high rates of interest than traditional banks. Commercial finance companies could also include large down payment penalties to prevent a borrower from refinancing with a bank if the borrower gets better creditworthiness.
3. The borrower gets flexibility in less-standard loan terms. But it requires suspicious estimation of the terms of the loan, together with interest calculation and payment scheme, default terms, and down payment rights.
Following types of loans are being offered by the commercial finance companies to business owners to support their market reputation.
· Business Purchase Finance
· Commercial Property Finance
· Import Letter of Credit Finance
· Insurance Premium Finance
· Inventory Finance
· Invoice Finance
· IT Finance Solutions
· Property Development Finance
· Purchase Order Finance
· Supplier Solutions
Alongside these business loan options, leading commercial finance companies are offering equipment finance. So, the business proprietors can also borrow money in terms of purchasing or leasing commercial several equipments that will help their business grow. Ranging from business intended vehicles for real estate, construction or transport also provided through this scheme. Most times the SMEs want to renovate their IT equipments for better productivity and the lenders provide loans for the same also.
Nowadays these commercial finance companies Australia are in high demand as they are providing loans for a variety of business needs to commercial customers. Solutions or loans are being offered to retail stores, real estate contractors, and business minded professionalslike doctors, advocates, etc. The borrower may apply loan for constructing a mall or business.