Business Fixed Rate Loan
There used to be a time when taking out a business fixed rate loan from a bank was just about the only way to finance commerce. The business owner borrowed a fixed sum of money and repaid monthly over an agreed term.
You probably want something more flexible than that, and so do other businesses. Which is why the ways of borrowing money have increased over time.
Today asset based lending is popular. Put simply, this means you borrow money based on the value of something you own. It might be a physical asset, such as a building, but it might be something intangible, such as a right to future income.
Business Fixed Rate Loan v Asset Based Lending
When you’re looking to choose a method of finance, there are plenty of reasons why a business fixed rate loan is not as flexible as other forms of asset based lending.
A business fixed rate loan is usually secured on a physical asset. As a result, it can take time to set the loan up. Access to these loans is often restricted to businesses that can demonstrate a track record of consistently good performance over several years, making it harder for new businesses.
A popular form of asset based lending which delivers a much more flexible solution is invoice finance. The asset against which you borrow is your sales ledger – in effect you’re being paid early, by your lender, and the loan is settled when your customer pays their bill.
The Flexibility of Invoice Finance
You have two choices of invoice finance – discounting or factoring.
Invoice discounting is ideal for organisations with the resources to manage their own credit control. Every time you raise an invoice the lender gives you an advance of up to 90% of its value. When the invoice is paid, you receive the balance less the fees.
By receiving the cash up to 90 days earlier your cash flow pressures are eased and you can spend less time juggling competing demands for your money.
Invoice factoring works in the same way as discounting, except that the lender also picks up responsibility for managing your credit control. This is ideal for organisations where resources are stretched and credit control is a burden.
Both forms of invoice finance can be conducted confidentially, if you don’t want your customers to know about it. On the other hand, some find that outsourcing credit control can speed up the payment process.
Find out how much you could release from your sales ledger instantly online >>
Let Touch Financial Help You Choose
If you’re exploring the options beyond a business fixed rate loan, Touch Financial has the knowledge and experience you need.
Our team of commercial finance experts have years of experience in helping organisations access funding, saving them time and money. We work with over 20 of the UK’s leading lenders, including the Bank of Scotland and Lloyds TSB Commercial Finance.
Compare factoring quotes instantly online >>
Also in this section:
- Learn more about starting a business loan
- Read about a long term business loan
- Alternative to long term business loans?
- Overview of business variable rate loan
- Learn more about a business fixed rate loan
