Commercial Loans

What it is

Borrowing against the business rather than against a specific piece of kit. You take an agreed amount, you repay it over an agreed term, and what you spend it on is largely up to you.

That's the difference from asset finance. Asset finance pays for a thing and takes security over that thing. A commercial loan gives you cash, and the security sits elsewhere, or in the case of unsecured borrowing, on a personal guarantee from the directors.

What people use it for

Bridging the gap between winning work and getting paid for it. Taking on staff before the contract that justifies them starts billing. Covering a rent deposit, a stock order placed months before it sells, or a quarter that came in quieter than forecast.

A recruitment agency paying contractors weekly while its clients pay monthly. A manufacturer whose biggest customer has just moved from thirty days to sixty. A firm that has been offered its own premises and needs the deposit before the lease can be signed.

None of those are asset purchases. There's nothing to take security over, which is exactly why they end up here rather than on the asset finance side.

What it can be used for

There's no asset list here, because a commercial loan isn't tied to an asset. What matters is what the money is for and whether the business can service it.

• Working capital and cash flow gaps
• Hiring ahead of a contract starting
• Stock and raw materials
• Premises costs, deposits and fit-outs
• Tax bills and one-off liabilities
• Expansion, a second site, or buying out a partner

What it's generally not for is buying a vehicle or a machine. Asset finance is usually the better structure for that, and it's worth checking before you borrow against the business as a whole.

How it works

Two broad shapes, and the difference between them is security.

A secured loan is backed by something the business or its directors own, most often property. Because the lender has something to fall back on, terms tend to run longer and the cost of borrowing is lower.

An unsecured loan isn't backed by a specific asset, but it will almost always involve a personal guarantee from one or more directors. That isn't a formality. It means your own assets sit behind the borrowing.

Terms are usually shorter than asset finance and repayments are fixed. Some funders work from monthly figures, others take a percentage of card takings or bank receipts, which suits businesses whose income moves around through the year.

In practice: you tell us the amount, what it's for and when you need it. We look at where it fits across the funders on our panel. We come back with the options, and we're clear about what security each one asks for.

Unsecured borrowing costs more

The funder is taking more risk and that's priced in. If there's an asset that could sensibly carry the borrowing, a secured route is usually cheaper over the life of the loan. It's worth asking the question rather than defaulting to unsecured because it's quicker.

A personal guarantee is a real commitment

Most unsecured commercial lending asks for one. It means that if the business can't repay, you can be pursued personally. Read what you're signing, and know that personal guarantee insurance exists to cover part of that exposure.

A loan doesn't fix a structural cash problem

If money is tight because customers pay late, borrowing buys time but the gap reopens. Invoice finance addresses the cause rather than the symptom. We would rather point you there than arrange something that leaves you in the same position in six months.

How much can a business borrow?

It depends on turnover, trading history, what the money is for and what security is available. Funders take different views on all four. We would rather look at your numbers and give you a realistic range than quote a headline figure that turns out not to apply to you.

Do I need to give a personal guarantee?

For unsecured lending, almost always. For secured lending it varies. If you would rather not give one, say so early, because it narrows which funders are worth approaching and that's better known at the start than after an application.

How quickly can funds arrive?

Faster than most asset deals, because there's no asset to inspect or value. A straightforward unsecured facility for an established business can move in days. Anything secured on property takes longer, because there's legal work involved that nobody can shortcut.

Can a new business get a commercial loan?

It's harder, and it's honest to say so. Most funders want trading history because it's the main thing they've to go on. Some will look at younger businesses, particularly where there's security or a strong personal position behind it. Worth a conversation rather than an assumption.

Is a loan better than asset finance?

They do different jobs. If you're buying a specific van or machine, asset finance is usually cheaper because the asset itself is the security. If you need cash for something with nothing to secure against, a loan is the right shape. We'll tell you which one your situation calls for.