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Different Ways To Finance A Business
PUBLISHED ON: 16/05/2025
Written by James Dutton
Key Takeaways
- The article covers seven funding routes: unsecured loans, secured loans, invoice finance, working capital loans, asset refinance, hire purchase and commercial mortgages.
- Options range from asset-light, creditworthiness-based products (unsecured loans, working capital loans) to asset-backed solutions (secured loans, asset refinance, hire purchase, commercial mortgages) and invoice-based funding (invoice finance).
- There's no single "best" option: the right choice depends on factors like whether you need cash for day-to-day operations, equipment investment, or property purchase, and how much risk/security you're willing to put forward.
Funding Solutions For Your Business
The business finance market offers a range of financial solutions, from traditional business loans to flexible alternative options that target a business’ specific needs. This article presents seven different methods to finance your business.
Choosing the right type of finance can feel overwhelming, particularly if you're unfamiliar with the options available or unsure which route suits your circumstances. Every business has different priorities, whether that's protecting cash flow, funding growth, purchasing new equipment, or managing seasonal fluctuations in income. The right finance solution depends on factors such as how quickly you need funds, whether you have assets to offer as security, your trading history, and the purpose behind the borrowing.
As a whole-of-market finance broker, we work with a wide panel of lenders to help match businesses with the funding solution that best fits their needs, rather than being limited to a single product or provider. This article presents seven different methods to finance your business, covering how each option works, who it tends to suit, and what to consider before choosing it, so you can make a more informed decision about your next step.
What are the methods of financing a business?
1. Unsecured loans
Unsecured business loans are relatively quick to obtain because they don’t require an asset to be put forward as security as they’re based on creditworthiness. Unsecured loans are typically used to support working capital or business growth and can be a good option for businesses who are asset-light.
2. Secured loans
A secured business loan requires one or more assets to be provided as collateral for the lender. This reduces the lender’s risk as they can repossess the asset(s) if your business is unable to repay. Eligibility doesn’t rely on creditworthiness and up to 75% of the assets value is able to be used as the financed amount.
3. Invoice finance
Invoice finance incorporates a range of products including factoring, invoice discounting, leveraging the value of your unpaid invoices. You can typically obtain around 90 per cent of each unpaid invoice within around 24-48 hours, which offers your business a steady flow of cash throughout each month.
4. Working capital loan
Working Capital Loans help ensure your business has the liquidity it needs to operate smoothly by providing short-term financing for day-to-day expenses. These loans offer quick access to cash, which you can repay in fixed monthly amounts over a set term. Working capital loans are typically unsecured, meaning they don't require collateral, and they are often approved based on the business's creditworthiness rather than assets.
5. Asset refinance
If your business owns high-value assets you can leverage their value using asset refinance. It involves a lender purchasing the asset from you, which provides a significant lump sum to use in your business. You then repay the lender at a fixed rate to ultimately retake ownership once all the repayments are made.
6. Hire Purchase
Hire Purchase allows businesses to acquire assets while spreading the cost over time. This type of financing lets you pay fixed monthly amounts for the duration of the agreement, with the option to own the asset outright once the final payment is made. Hire purchase is ideal for businesses looking to invest in equipment or machinery without using up large amounts of capital upfront. The agreement can be tailored to your needs, and once it’s complete, the asset is yours to use however you see fit.
7. Commercial mortgage
You can finance the purchase of your business premises through a commercial mortgage, which is a long-term loan similar in structure to a residential mortgage. Lenders usually require a deposit of around 25 per cent. You can also use commercial property finance to become a landlord and rent the premises to other businesses.
What is the best way to finance a business?
The best way to finance your business depends on your specific situation and financial needs. If you're looking to invest in equipment, for example, hire purchase or leasing might be ideal. For businesses that need quick access to cash for day-to-day operations, a working capital loan could be a great choice. It’s important to assess your business’s cash flow, growth plans, and how much risk you’re willing to take on before deciding on the right financial solution. What works for one business may not work for another, so choosing the right option is about finding a fit that supports your objectives and future growth.
How to apply for Business Finance
MAF Finance Group can compare offerings from a wide panel of funders to find the best solution for you.
If you would like to get a quote or need further information, simply fill out the form and we will contact you. If you want to speak to someone directly, you can call us on 0115 958 6872 and a member of our team will be in touch. Alternatively, you can email us at [email protected].
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