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What Is Commercial Finance? Essay

650 words - 3 pages

Commercial finance is the simple method of providing loans to different kinds of companies that are busy in profitable business dealings. Mainly the commercial financing institutions don’t offer loans to general people like banks. So, a commercial financing agency does not provide loans for purchasing private home or vehicle. Commercial finance has to do with lending money to businesses through any business entity or commercial banks. Business owners can apply for the following kinds of the loans to strengthen their market status.
Different commercial finance options:

1. Debtor finance:
Through this funding scheme, help for the business grow by managing necessary cash flow in delay of credit terms. Debtor finance is now gaining popularity as a functional financing tool, enhancement or changing usual overdrafts or fixed-limit commercial loans. Now in market, two types of debtor finance choices are being available i.e. Confidential and Disclosed.
Minimum terms, notice periods, audit requirements and exit fees like variables used as scale points to rank a debtor finance provider. Invoice discounting, invoice factoring, invoice finance, asset finance, cashflow finance, working capital finance, etc are some other similar products are being available in the market as substitutes of debtor finance.
2. Import Letter of Credit Finance:
It is a contract between financial agencies to pay vendors for international business transactions derived from documents and not the commodities or service involved. It helps the business owners in purchasing abroad uncomplicated. Letter of credit payable ‘at sight’, and ‘on term’ are the two basic payment options available for import letter of credit finance.
3. Insurance Premium Finance:
Insurance premium finance is an unsecured loan provided to the business owners to pay their insurance premium(s) in advance. The borrower needs to pay back the loan amount over a fixed. Through this the borrower can reinvest the cash flow funds into running capital to expand the business.
4. Inventory Finance:
When a business owner needs instant and temporary loan to purchase products for sale at that time...

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