In today’s uncertain times, capital has never been a more valuable asset for businesses, particularly those just starting out. When perusing the various business funding options, you’ve likely come across the term “property finance” and yet you might not understand exactly what it means or how your business could stand to benefit from it.
What is property finance?
In essence, property finance is a secured business loan where residential or commercial property (or properties) is used as collateral against the loan. It’s a kind of loan that’s available from most reputable financial institutions and via online sources such as Nucleus Commercial Finance and is ideal for smaller startups that have great potential but lack initial growth capital.
Depending on the value of the property you’re borrowing against, potentially thousands (or even millions) can be borrowed to help give a business a necessary cash injection and help it find its footing, either at the start of its journey or during a tumultuous patch. Indeed, as property finance is secured against something tangible, even businesses with low fixed assets that don’t meet traditional lending criteria should be able to successfully apply.
What are the different types of property finance?
Bridging Loan – As the name suggests, this is a loan engineered to get your business through a certain period in its journey – to form a bridge between one stage of its life and the next. It’s not a long-term option and will generally last no longer than two years. This is a solution that serves a very specific purpose and should only ever be considered if you are certain you’ll be able to recuperate the loan in short order. For example, ifs you need to make a purchase immediately but certain applications are still being finalised.
Interest-Only – This type of property finance allows the borrower to only pay back the interest on their loan on a monthly basis and then asks for a final lump repayment at the end of the term (which can last up to five years). This is the ideal option for businesses that have a healthy long-term forecast but will perhaps not be making much money in the immediate future.
Commercial Property Finance – This is a long-term option, lasting in some cases up to seven years. This is the ideal option for a business that’s just starting up and has a solid and realistic business plan in place. Note that the amount you’ll be liable to borrow will directly correlate to how valuable the lender perceives your business as being and how much your property is worth.
Term Loan – A fixed-term property finance option that sees the borrower paying back a lump sum in monthly instalments. For help paying unexpected bills, this is a particularly popular solution.
How can your business benefit from property finance?
It’s an ideal option for a number of situations. For example, perhaps you’re planning on growing the business or moving to a new location and can’t quite find the funds. Above all else, it’s an option that you might not have considered, but it could just be the missing link in your growth strategy!
