Types of Commercial Loans: Powering Your Business Goals

Here are some of the main types of commercial finance businesses typically use in Australia:

• Commercial Real Estate Loan: These loans are perfect for businesses looking to make significant investments, like buying a commercial property or build a new facility, or expanding an existing office, warehouse, or retail space. Since the loan is backed by the property itself, businesses can often borrow substantial amounts.

• Business Lines of Credit: Think of this like a flexible credit card for your company. A business line of credit gives your company access to a set amount of money. You don't receive it all at once; instead, you can draw funds as needed, much like an overdraft. The best part? You only pay interest on the amount you actually use, which helps keep your interest costs down. Great for managing day-to-day cash flow fluctuations.

• Equipment Financing: Instead of buying expensive equipment outright (think new tools for a tradie, machinery for a manufacturer, or even a coffee machine for your cafe!), you can finance it over time. This type of loan is often easier to secure because the equipment itself typically serves as collateral for the loan.

• Term Loan: A term loan provides you with a lump sum of money upfront for a set period. You repay the principal and interest through a clear schedule of equal monthly payments, often over a term longer than a year. This helps reduce the lender's risk as the loan amount decreases over time. It's much like a personal loan, but designed specifically for your business, giving you funds to use as you see fit, repaid over a fixed term.

• Industrial and Commercial Construction Loan: These are highly specialised loans that specifically cover the costs of building a brand-new commercial property (like a new factory in the Tweed region) or undertaking a significant renovation to an existing one. These are often structured with progressive payments as construction milestones are met.

• Commercial Auto Loan: Just like a personal car loan, a commercial auto loan helps businesses purchase vehicles for their operations, whether it's a fleet of vans for deliveries, trucks for construction, or a company car. However, because modern vehicles depreciate relatively quickly, many lenders will only finance them for a limited time when you're planning your fleet.

• Bridging Loans: Bridging loans provide immediate, short-term cash flow to help businesses meet existing financial commitments, often "bridging" a gap between transactions. They often come with higher interest rates and typically require collateral, such as inventory or real estate. These are incredibly useful for short-term cash flow needs – for example, a property developer using a bridge loan to buy a new development site before selling their current one.

• Inventory Financing: This type of financing helps businesses cover the upfront costs of purchasing products or stock that won't be sold immediately. In this scenario, your existing stock or future inventory acts as collateral for the loan.

• Cash Flow Finance (Working Capital Loans): With cash flow finance, a loan is backed by your company's anticipated incoming cash flows (the money you expect to flow into your business). This financing is repaid using the cash generated after the loan is taken out. These are also often called working capital loans, perfect for managing day-to-day operational expenses, payroll, or temporary dips in revenue.

• Equipment Finance (General): This broad term can refer to either a direct loan or a lease a business obtains to acquire new or used machinery. "Equipment" is a wide category and includes almost any tangible asset not considered real estate, such as office furniture, computers, specialised manufacturing machines or plant.

At Enhanced Coastal Mortgage Brokers, we’re here to help you understand all of this in simple terms, so you can confidently choose the right loan to fuel your business's unique circumstances and drive its success!