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  • Writer's picturePhillip Bacon

5 Types of Commercial Finance For SMEs

Updated: Dec 6, 2023

Small and Medium-sized Enterprises (SMEs) play a vital role in the global economy, accounting for a large share of the employment and economic growth. They are also a major source of innovation and entrepreneurship in the world.

However, in such a dynamic business environment, SMEs often face financial challenges that hinder their ability to grow, scale and excel in their industries. From investing in assets to managing cash flow, there are a wide range of factors that are affected by a lack of financial resources.

Fortunately, when it comes to finance for SMEs, the market offers a range of commercial finance solutions that you can leverage for various purposes. In this article, we are going to discuss 5 types of commercial finance for SMEs, and their benefits so you can choose the most suitable one for you.

1. Business Loans

Business loans are one of the most commonly used commercial finance solutions in the world. As a simple and straightforward method to obtain finance for SMEs, business loans are generally available in two types; secured and unsecured loans.

Serving multiple purposes, both these types of loans fulfil different purposes for different organisations. Whether you are looking to scale your operations or just need help with working capital, business loans offer a great solution.

What’s more, business loans from established banking institutions come with greater accessibility, structured repayments and competitive interest rates. If you’re looking for a traditional source of finance for SMEs, business loans are the way to go.

2. Invoice Financing

Invoice financing is one of the most beneficial financial solutions for SMEs looking to manage cash flow gaps. Also known as invoice factoring, this financial solution allows businesses to receive immediate funding by using their outstanding invoices as collateral.

Bridging the gap between when you need the money and when you are going to receive it, invoice financing allows you to effectively manage your working capital and maintain cash flow.

Moreover, it also allows you to meet immediate expenses and sustain business operations without having to wait for clients to settle their bills.

3. Venture Capital

One of the most popular ways to obtain finance for SMEs is through venture capitalists. This type of financing option is particularly beneficial to businesses looking to scale their operations.

Venture capitalists are generally looking to invest in innovative business models and promising startups in exchange for equity. To obtain venture capital, it is important for businesses to have a strong business plan and a vision for growth.

What’s more, along with the financial support, venture capitalists also offer greater business expertise, industry connections and invaluable guidance to the SME.

4. Asset Finance

As the name suggests, asset finance for SMEs allows businesses to purchase tangible assets like equipment, machinery and vehicles. In this financing solution, the asset purchased acts as collateral, allowing you to purchase the asset without having the cash for it upfront.

Providing businesses with the ability to invest in critical assets without having to deplete their reserves, asset finance mitigates risk for the borrower. Further allowing the businesses to maintain a healthy cash flow and encourage business growth and operational efficiency.

5. Crowdfunding

Crowdfunding has recently emerged as a unique type of commercial finance for SMEs. Generally used to raise capital for a new project or product, this financial solution involves acquiring funding from a large group of people from around the world.

With a number of platforms allowing SMEs to present their business ideas, products and services to the world in search of funding, this is an efficient way to raise money.

The process generally involves marketing your products or services in a way that interests potential investors. Then, funds are raised in return for rewards, pre-orders or equity. The best part of crowdfunding is that it not only offers sufficient financial support but also fosters brand awareness and loyalty.

Choose Knights Row For Commercial Finance For SMEs

From what we’ve seen, there are many types of commercial finance for SMEs that can help businesses achieve their goals. Whether you need funding for scaling operations, managing cash flow or simply purchasing a new asset, we have the perfect solution for you.

As one of the leading commercial finance brokers in Leicester, we help you get the most suitable finance solutions for your business. From finding the right lenders and financiers to negotiating the best deals, our finance experts will help you every step of the way.

Moreover, with years of experience in the world of finance, we offer you access to an exclusive network of lenders that are not readily available in the market.

Our commercial finance solutions include supply chain finance, invoice finance, business loans, and so much more. For more information about our services, click here or get in touch with us now!



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