Finding the right kind of finance for your business is not easy. If the financing package doesn’t suit how your business works, you might find yourself constantly struggling. A successful business needs constant planning and attention, especially when it comes to financing a business. Cash is king and if there’s not a healthy flow coming in and out of your business, it can put you under massive strain. However, it’s not always as simple as going to the bank and asking for a loan, the finance deal you take out has to fit your business purposes, needs and goals, whilst also looking ahead.

Thinking about the terms of a finance package is equally just as important. Some require security; others have different rates of repayment, some lenders may even ask for a personal guarantee. It's vital that you consider the consequences and what could happen if you fail payments (, what options have you got when it comes to financing?

Secured Loan

A standard and straightforward loan type. A secured loan is where lenders require some form of security from you, to back against the loan. These are commonly offered to start-ups and SME’s as without much credit history, lenders will regard them as higher risk. Security is typically offered in the form of personal guarantees, which can require directors to use their personal property as security. However, businesses can also use large assets or commercial property.

The benefits in secured loans comes from more manageable repayments and lower interest rates, as lenders have the backup of security in case the loan does defunct. Because the security is there, lenders will sometimes look past a non-perfect credit rating.

Hire Purchase

Hire purchase is a form of asset finance, which covers a variety of finance products. Effectively, however, hire purchase allows you to purchase the top assets, machinery and equipment, paying monthly as opposed to one lump sum. Although you have control of the asset on hire purchase, whilst you are still paying back the loan, technically it is still owned by the lender.

Importantly, for smaller business or start-ups it enables you to have the best possible equipment, while also having better control over your cash flow by managing monthly payments.


Re-financing in a way is very similar to using a secured loan. A lender will offer you a loan secured against an existing asset on your balance sheet. This allows you to release capital which is tied up in your assets. You pay back in monthly instalments, over a set period, giving you a great opportunity to forecast and get your cash flow right. Refinancing is a great way for existing businesses, which are asset rich but cash poor to get that extra source of finance.

There is also the option of completely refinancing your asset. This is effectively a ‘sale and leaseback’ This option allows you to completely sell your assets to the finance company and then lease it back to yourself, to continue using the asset. As an option when it comes to finding additional finance, it gives you a flexible means of borrowing and allows you to gain instant capital.

Bridging Loan

A bridging loan is ideal for if you’re looking to relocate your business. It is a short-term form finance designed to bridge the gap between the purchase of one real estate property and the pending sale of another. Bridging lenders will always want security to cover the bridging loan and more often than not, it will be the same property which is sold to repay the loan. Instead of paying interest like a mortgage, when you take out a bridging loan, you will only pay interest on the amount that exceeds your property’s value.

The main benefits will see you get additional breathing space as you look to sell an existing property, without the pressure of having to sell before you can move. Bridging loans are also much easier o arrange than mortgages or a traditional form of finance.

Trade Finance

Trade finance is a catchall term for several financial products which can be used to fund international trading. As you are trading abroad, where there are different laws on taxes and quality, there are specialist funders, who create packages for trading internationally.

Funders of trade finance will look to garner good relationships with both sides involved in any international dealing. It can also help you to build up trust with clients or suppliers, as both parties will not be forced into a position where you are left waiting months for payment or out of pocket until goods arrive to be sold.

In Summary

Doing your research and finding the best possible loan for you, is far better than just going for any traditional loan, or using a payday lender. By finding the right kind of finance, lenders can help you design the right kind of package to suit your business and its needs much more directly. What you must consider, when thinking about finance, is the potential costs involved if you decide not to take out finance.

Poor cash flow, bad production or a weakened relationship with suppliers are the kinds of problems that could see you go down a ( liquidation route.

Author's Bio: 

Edward is a Journalism graduate who now writes in Sheffield. Working for Wilson Field, he focuses on finance for start-ups and SEM’s