Business and commercial finance, explained in plain English

If you run a business, "commercial finance" can sound like a wall of jargon. Let me break down the main ways businesses borrow — so you know what's out there before you talk to anyone.

What "business and commercial finance" actually means

Business and commercial finance is really just an umbrella term for the different ways a business can borrow money or fund something it needs — whether that's day-to-day cash flow, a new van, a bigger workshop, or a large one-off purchase.

The word commercial simply means it's for a business rather than for you personally. A lot of these products rhyme with things you already know — a loan, a mortgage, an overdraft — just built around how a business earns and spends.

There isn't one "business loan" that suits everyone. The right shape of funding usually depends on what you need the money for and how your business brings money in. That's exactly the kind of thing a good adviser untangles with you.

The main types you'll come across

Here are the ones that come up most often, in plain English:

• Business loans — you borrow a lump sum and repay it over an agreed period. Can be secured (backed by an asset) or unsecured.
• Commercial mortgages — a mortgage on premises your business uses or owns, like a shop, unit or warehouse.
• Asset finance — funding tied to equipment or vehicles. Includes hire purchase (you own it at the end) and leasing (you use it and hand it back).
• Invoice finance — you borrow against money your customers already owe you, so you're not left waiting on unpaid invoices.
• Overdrafts and revolving credit — a flexible pot you dip into and repay as cash flow rises and falls.
• Bridging finance — short-term borrowing to "bridge" a gap, often while you arrange something longer term.

Don't worry about memorising these. The useful takeaway is that different jobs suit different tools — buying a machine, smoothing cash flow and buying premises are three different problems.

Secured, unsecured and personal guarantees

You'll hear lenders talk about whether borrowing is secured or unsecured. It's worth understanding the difference.

• Secured means the borrowing is backed by something of value — often property or business assets. If repayments aren't kept up, the lender may be able to take that asset.
• Unsecured means it isn't tied to a specific asset. It often leans more heavily on the strength of the business and its trading.

You may also come across a personal guarantee — a promise from a director or owner to repay if the business can't. This is a genuinely important thing to understand before you sign, because it can put personal assets on the line. A regulated adviser will walk you through what any guarantee actually means for you.

What lenders tend to look at

Every lender is different, and I can't tell you whether you'd be accepted — nobody honest can promise that up front. But in general, lenders are trying to answer one question: can this business comfortably afford to repay?

To get a feel for that, they often look at things like:

• How long you've been trading and how the business has performed
• Your accounts, cash flow and existing commitments
• What the money's for and how it'll be repaid
• Any security or guarantee on offer
• The credit history of the business and, sometimes, its directors

Because lenders weigh these things so differently, two of them can look at the same business and see it completely differently. That's a big reason people find it useful to have someone search widely rather than knock on one door.

Using a broker vs going to your own bank

You've got options here, and it's worth being honest about the trade-offs.

Going direct to your own bank is familiar, and some lenders keep certain deals exclusively for people who come to them directly — a broker won't always be able to access those.

Using a whole-of-market adviser means someone searches across many lenders, not just one, and can often reach specialist lenders you'd struggle to find alone. The flip side to be aware of: some brokers charge the client a fee, so it's fair to ask about that up front — the good ones are completely open about how they're paid.

Neither route is automatically "better". It depends on your situation, and there's no harm in understanding the whole picture before you decide.

Getting yourself ready

Whatever route you take, a bit of prep makes everything smoother. It helps to have a rough idea of:

• What you need the money for — and roughly how much
• Up-to-date figures — recent accounts, bank statements and a sense of your cash flow
• How you'd repay — the story of where the money comes back from

None of this has to be perfect or polished. It just means that when you do speak to an adviser, you can skip past the basics and get to the useful part faster.

Some business and commercial finance is secured against property or business assets. Your property may be repossessed if you do not keep up repayments on a mortgage or other debt secured against it. Not all business borrowing is secured — a regulated adviser will explain what applies to you. This guide is general information, not advice.