Navigating 19 Myths About Commercial Finance
Commercial finance is a crucial tool for businesses of all sizes, yet many misconceptions can deter companies from fully exploring their options. At Navigate Commercial Finance, we believe that dispelling these myths is essential for making informed decisions that support your business’s growth and success. In this post, we’ll walk you through 19 common myths about commercial finance and provide the facts you need to navigate these waters with confidence.
Commercial Finance is Only for Large Enterprises
Reality: Commercial finance solutions are tailored to suit businesses of all sizes, from small startups to large corporations. Whether you're aiming to expand operations, invest in new equipment, or manage cash flow, there are financial solutions available to meet your specific needs.
Now is the Wrong Time to Take on Debt
Reality: Timing is important, but the decision to take on debt should be based on your business’s specific needs and potential for growth, rather than market conditions alone. Strategic borrowing, even in uncertain times, can be a smart move if it supports long-term objectives. There are also more lenders offering a wide range of funding solutions that are keen to deploy funds.
Companies Only Borrow Money When They Are in Trouble
Reality: Borrowing is often a strategic decision, not a sign of distress. Businesses borrow to fund growth, capex, acquisitions, seize new opportunities, or manage cash flow more effectively. It's a proactive tool for ensuring the business continues to thrive, rather than a last resort.
Loans and Credit Can Only Be Backed by Assets
Reality: While asset-backed finance is common, it’s not the only option. Many lenders offer unsecured business loans and revolving credit facilities that don’t require physical assets as collateral, based on your business’s creditworthiness and revenue. Note lenders may ask for personal guarantees.
Why Choose Navigate Commercial Finance?
At Navigate Commercial Finance, our approach is centred around understanding your business and tailoring financial solutions that align with your specific goals. With our extensive network of lenders, wealth of experience and commitment to ongoing support, we ensure that your business has the financial tools it needs to meet your strategic plan. Whether you’re looking to expand, manage cash flow, or explore new opportunities, we’re here to help you make informed, confident decisions every step of the way.
Commercial Finance is Only for Real Estate Transactions
Reality: While commercial finance is often associated with real estate, it encompasses a broad spectrum of financial products designed to meet various business needs, from operational expenses to technology investments and beyond.
I Need to Own a Building to Be Eligible for Finance
Reality: Owning property is not a prerequisite for securing finance. Many financial products are available to businesses that lease premises or operate virtually, focusing instead on your overall financial health and business potential.
Business Credit Only Depends on Timely Payments
Reality: Timely payments are crucial, but they’re just part of the picture. Factors like credit utilisation and credit history also play significant roles. A well-rounded approach to managing your business credit is essential for long-term stability.
Hard Enquiries Don’t Affect Business Credit Scores
Reality: Each hard enquiry made when seeking credit can have an impact on your business credit score. It’s important to be strategic about when and how often you apply for new credit. By working with Navigate Commercial Finance, you can minimise unnecessary enquiries and ensure that each application serves a clear purpose in supporting your business growth.
The Maximum I Can Borrow is Based Mainly on Profitability
Reality: Whilst debt service (born out of profitability) is a key factor for loans, it's not the only determinant of how much a business can borrow. Lenders also consider other aspects, such as, revenue (how sticky is it?), your cash flow and financial forecasts, credit profile to name a few. For asset backed finance, the lender will consider the value and quality of any assets you can use as collateral. By working with an intermediary like Navigate, you can assess all these factors together to find the most suitable funding solution for your business needs.
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Interest Rates on Commercial Loans are Always High
Reality: Interest rates on commercial loans vary based on several factors, including your business's creditworthiness, the type of loan, and current market conditions. With proper planning and guidance, you can secure competitive rates that align with your business goals.
You Should Always Avoid Debt
Reality: Not all debt is bad. Strategic borrowing can be a powerful tool for growth, enabling businesses to invest in new opportunities, expand operations, and improve cash flow. The key is to manage debt responsibly and ensure it aligns with your long-term strategy.
My Customers Can Find Out About My Debt, Making My Business Look Weak
Reality: Your business’s financial arrangements are typically confidential between you and your lender. Customers generally have no visibility into your debt unless it's publicly disclosed for specific reasons, such as in the case of public companies or registrations at Companies House. In fact, leveraging finance wisely can strengthen your business, ensuring better service, quicker payments and stability for your customers.
Longevity in Business Automatically Ensures Excellent Credit
Reality: While being in business for a long time can positively impact your creditworthiness, it doesn’t guarantee an excellent credit score. Active management of your credit profile is essential. Regular reviews and strategic adjustments to your credit practices are necessary to maintain and improve your credit standing.
Commercial Finance is Riskier Than Personal Finance
Reality: Commercial finance is not inherently riskier than personal finance. In fact, it can be a safer option when used correctly, as it is designed to support business operations and growth, with terms and conditions that reflect the specific needs of a business.
Only Established Businesses Can Get Commercial Finance
Reality: Even startups and early-stage businesses can access commercial finance, provided they have a solid business plan and demonstrate potential for growth. Lenders often look at future projections as well as current performance.
Commercial Finance Takes Too Long to Secure
Reality: While some financial products may take time, many commercial finance options are designed for quick approval and disbursement. Working with a knowledgeable broker can help expedite the process, ensuring you get the funds when you need them.
You Don’t Need Separate Business Credit
Reality: Relying solely on personal credit can limit your business’s financial potential. Establishing distinct business credit offers numerous advantages, including better access to funding, higher credit limits, and the ability to separate personal and business finances. This separation not only enhances your financial stability but also supports long-term growth and future opportunities.
You Have to Accept the First Offer You Get
Reality: Working with a commercial finance broker, like Navigate, allows you to access a wide range of lending options without the hassle of shopping around yourself. Brokers have extensive networks and key stakeholder relationships This approach ensures you get the most suitable finance solution, saving you time and potentially reducing costs.
Commercial Finance is Complicated
Reality: While the process may seem complex, it doesn’t have to be. With the right guidance, navigating commercial finance can be straightforward. We’re here to provide clarity and support, making sure you understand each step and how it benefits your business.
Take the Next Step
Looking for a commercial finance solution to fund your growth plans, or smooth cashflow? Contact Navigate Commercial Finance for a comprehensive assessment of your funding needs and how our solutions can help unlock your business’s potential.