- Commercial finance includes a range of funding options designed for different business goals, from managing cash flow to purchasing property or equipment.
- The right finance product depends on what you're funding, how much you need to borrow and whether you can provide security.
- Comparing lenders and finance products can help you find a solution that better suits your business.
Whether you're expanding, investing in equipment or managing cash flow, choosing the right type of commercial finance can make a big difference to your business.
From commercial property loans to unsecured finance and lines of credit, different funding options are designed for different goals.
This guide explains how commercial finance works, the most common types available, and how to choose the right option for your business.
What is commercial finance?
Commercial finance refers to funding designed to help businesses cover expenses, invest in growth, or manage cash flow.
Depending on your needs, commercial finance can be used to:
- purchase property
- buy equipment
- hire staff
- fund expansion
- bridge cash flow gaps
Different finance products suit different situations, which is why understanding your options is important before applying.
How does a commercial loan work?
Commercial finance gives businesses access to funding, which is then repaid over an agreed period according to the loan terms.
How the finance works depends on the product you choose. Some options provide a lump sum upfront, while others let you access funds as needed. Some require security, while others are available without collateral.
The right finance product will depend on what you're funding, how much you need to borrow, and how you'd prefer to manage repayments.
Which type of commercial finance is right for you?
Different types of commercial finance are designed for different business needs.
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What types of commercial business loans are available?
There are many types of commercial finance available, each designed for a different business need. Some products are better suited to purchasing assets, while others help improve cash flow or fund day-to-day operations.
Business acquisition loans
Best for: Buying an existing business or purchasing a franchise.
A business acquisition loan helps you purchase an established business or franchise without paying the full purchase price upfront.
Rather than starting from scratch, buying an existing business can give you access to an established customer base, proven systems and immediate cash flow. A business acquisition loan helps spread the cost over an agreed loan term, making the purchase more manageable.
When assessing an application, lenders will typically consider the financial performance of both your business (if applicable) and the business you're looking to acquire, along with factors such as your experience, available security and ability to repay the loan.
Business term loans
Best for: One-off investments with predictable repayments.
A business term loan provides a lump sum upfront that you repay over an agreed period.
Businesses commonly use term loans to purchase equipment, vehicles, expand operations, invest in new opportunities, or refinance existing debt.
Because repayments are typically fixed over the loan term, term loans can provide greater certainty when budgeting.
Equipment finance
Best for: Purchasing business equipment, vehicles, and machinery.
Equipment finance is specifically designed to help you purchase assets you need to operate.
This may include company vehicles, trucks, construction machinery, medical equipment, manufacturing equipment, or office technology.
Rather than paying the full purchase price upfront, you can spread repayments over time while using the equipment immediately.
Business line of credit
Best for: Managing cash flow and accessing flexible funding.
A line of credit gives you access to funds up to an approved limit.
Unlike a traditional loan, you only pay interest on the amount you draw, and as you repay the balance, those funds become available to use again.
A line of credit can be useful for managing seasonal fluctuations, covering supplier invoices, or responding to unexpected business expenses.
Business overdraft
Best for: Covering unexpected short-term expenses.
A business overdraft is linked to your business transaction account and allows you to spend more than your available balance, up to an approved limit.
Like a line of credit, it can help manage temporary cash flow gaps, but it's connected directly to your bank account rather than operating as a separate credit facility.
A business overdraft can be useful for covering wages, supplier payments, or other short-term expenses when cash flow is temporarily tight.
Invoice finance
Best for: Improving cash flow while waiting for customers to pay.
Invoice finance gives you access to funds tied up in unpaid invoices.
Rather than experiencing cash flow pressure while waiting 30, 60 or even 90 days for payment, you can unlock a portion of the invoice value upfront and receive the remaining balance (minus any applicable fees) once the customer pays.
Invoice finance can be a useful solution for businesses with long payment terms or businesses looking to improve working capital without taking on a traditional loan.
Trade finance
Best for: Purchasing inventory or paying suppliers.
Trade finance helps you pay domestic or international suppliers before goods are sold.
Instead of paying large supplier invoices upfront, trade finance spreads the cost over an agreed period, helping preserve working capital while keeping inventory moving.
It can be particularly useful for wholesalers, importers, manufacturers, and retailers that regularly purchase stock in bulk.
Merchant cash advance
Best for: Businesses with regular EFTPOS or card sales.
A merchant cash advance provides funding based on your future card sales rather than fixed repayments.
Instead of making scheduled loan repayments, a percentage of your daily or weekly card revenue is automatically used to repay the advance. This means repayments generally rise and fall with your sales.
Merchant cash advances can be suitable for businesses with fluctuating revenue, such as retailers, hospitality venues, and cafés.
Unsecured loans
Best for: Businesses that don't want to provide assets as security.
An unsecured business loan doesn't require property or equipment as collateral.
Because the lender takes on more risk, eligibility requirements may be stricter and interest rates may be higher than secured finance.
For businesses that meet the criteria, however, unsecured finance can provide faster access to funding without tying up business assets.
What do lenders look for when assessing commercial finance?
While every lender has different criteria, they'll generally assess:
- Your business revenue and cash flow
- Trading history
- Personal and business credit history
- Existing debts and financial commitments
- The purpose of the finance
- Available security (where applicable)
Having up-to-date financial records and a clear understanding of how you'll use the funds can help strengthen your application.
How to choose the right commercial finance
The right commercial finance solution depends on what you're trying to achieve, how much funding you need, and how you'd prefer to repay it.
Before applying, ask yourself:
- What am I funding? A property purchase, equipment upgrade, or working capital may each require a different finance product.
- Do I need ongoing access to funds or a one-off lump sum? A line of credit may suit ongoing cash flow needs, while a term loan is often better for a single investment.
- Can I provide security? Secured finance may offer higher borrowing limits or more competitive rates, while unsecured finance doesn't require business assets as collateral.
- How quickly do I need funding? Some products have a faster approval process than others.
If you're unsure which option is best, comparing lenders can help you find a solution that matches your business needs and financial circumstances.
At Valiant, we compare finance from 90+ lenders to help match businesses with funding options that suit their needs. Our specialists can help you understand your options and guide you through the application process from start to finish.
