Commercial financing for business

Acquiring commercial financing for your business is one of the most important things you need to do for your business. Commercial financing for business is going to be harder to acquire from some types of personal financing because businesses may pose a larger risk as they ask for more money.

Financing a business requires you to have a business plan, collateral, and a few other things. You will need to provide information pertaining to your fixed costs and variable costs. The fixed costs you need to finance are those costs that will remain the same. These costs are your rent, equipment purchases, and other things. Your variable costs are a little harder to predict as you need to adjust them for market changes and other things. Variable costs are directly tied to your production levels and how you are able to generate sales for your company. Adding up your fixed costs and variable costs will allow a lender to gather a well-rounded perspective of your business and make a decision as to how much money you actually need and what you can afford.

Every business will need to turn to commercial financing originally when they are in the startup phase. This money helps to pay for the growth and development of your organization. To show a lender that you need the money and why you need the money, you need to have a list of all the things you plan to purchase with the funds. Then you need to show them a copy of your marketing plan and other things to show them how you are going to strengthen the business and acquire the income you need to sustain your cash flow. What are some of the commercial financing options you need to look at when you are starting or expanding your business:

• Seed capital. What is seed capital? Seed capital is money you need to get your business initially started. The funds usually come from people that have a given interest in your company. Usually these investors are friends and family members or people that have deep pockets and want to see your business become a success. Seed capital is usually a small amount of money to get stared with but it will be enough to get your business started.


• Commercial loans. Commercial loans are offered to your business if you have a high enough credit rating and if you can show lenders that you will be able to repay your loans in a timely manner. Commercial loans do require you to provide a down payment or a piece of collateral to help secure the loan.


• Sale and leaseback. The other financing source you should consider is taking your equipment and selling it to investors and others that will allow you to lease it from them. This gives you money to pay for the expansion of your business and you still have the chance to use the equipment to produce the goods for your customers. Sale and leaseback is ideal for your company because it allows you to get the asset off your balance sheet, which will help you with taxes along with your accounting.


• Factoring. Another way to acquire the money you need for your business to succeed is to sell your invoices to a factoring firm. They will offer you 80% of the total invoice amount now so you can sustain your cash flow and take the funds to pay for other business needs. Once they collect the rest of the money from your customers, you will be given the rest of the money minus the fees to the factoring firm.