Finance Options UK

Types of Finance and When They Are Used

Commercial Finance Product Guide

A plain-language reference covering the main types of commercial finance available in the UK. Whether you are a business owner exploring your options or an introducer looking to identify the right product for a client, this guide explains what each product is, when it is used, and what a typical case looks like.

Every case is different. The products below represent the main categories we work with — but the right solution depends on your specific circumstances, security, and objectives. We are happy to discuss any enquiry with no cost or obligation.
Guided finance selector

Find the finance route worth examining

Answer a small number of questions about the purpose and structure of the transaction. The selector will then take you to the relevant entry in the full guide. It is a product guide, not a recommendation, offer or credit decision.

Step 1 of 3: Purpose No personal details
Purpose

What do you need the finance for?

Start with the underlying requirement rather than a product name.

1Buying or refinancing propertyCommercial premises, investment property, mixed-use property or short-term acquisition funding. 2Funding property works or developmentRefurbishment, conversion, ground-up construction or a completed scheme awaiting sale. 3Funding a businessExpansion, working capital, unpaid invoices, tax liabilities or variable cash flow. 4Financing or releasing value from an assetVehicles, plant, machinery, equipment or assets the business already owns.
Transaction facts

How will the property be used?

Occupation, tenancy and timing determine the likely property-finance category.

1The business will occupy itFor example, an office, workshop, warehouse or retail unit used by the borrower’s own business. 2It will be let to a third partyThe rent and quality of the occupational lease are central to the lender’s assessment. 3It combines commercial and residential useFor example, a shop with flats above or another mixed-use property. 4There is a short deadline or temporary funding gapThe immediate issue is speed or a clear short-term bridge to a later exit. 5The property requires worksThe scale of refurbishment or development is more important than the intended end use at this stage.
Transaction facts

What is driving the short-term requirement?

Auction deadlines are a specialist use of bridging finance, while other temporary gaps generally fall under bridging finance more broadly.

1An auction completion deadlineThe facility must be structured around the contractual completion date. 2Another temporary property funding gapFor example, a chain break, urgent purchase, equity release or time needed before refinance.
Transaction facts

What stage and scale of work is involved?

The distinction between refurbishment, development and development exit finance rests mainly on the scope of works and the stage reached.

1Refurbishment or conversion worksImprovement works are required before the property can be sold, let or refinanced. 2Ground-up construction or major developmentFunds need to be released in stages as construction progresses. 3The scheme is complete but units remain unsoldThe development facility is approaching maturity and more time is needed for sales. 4The property is being bought at auction before worksThe first facility must meet the auction deadline, followed by the appropriate works route.
Transaction facts

What scale of work follows the auction purchase?

The immediate route is auction finance, but the later facility depends on the scale of works.

1Refurbishment or conversionStart with auction finance, then compare the refurbishment-finance entry. 2Ground-up or major developmentStart with auction finance, then compare the development-finance entry.
Transaction facts

What does the business need funding for?

Choose the situation that best describes the immediate funding requirement.

1A fixed sum for expansion or capital expenditureA one-off amount with regular repayments over an agreed term. 2Customers pay invoices more slowly than we pay costsA recurring gap tied to business-to-business invoices. 3Cash flow rises and falls through the yearA seasonal or variable need that is repaid and then returns. 4A corporation tax, VAT or PAYE liability is dueThe immediate issue is spreading a defined HMRC payment. 5Most revenue is received through card salesCard turnover may support an advance, but the required repayment pattern still matters.
Transaction facts

Is suitable security available?

Property or suitable business assets may support a secured structure. Without security, the lender relies more heavily on trading performance and credit quality.

1Yes, suitable security is availableThe business can consider a secured term loan. 2No, or the business does not want to provide securityAn unsecured term loan may be the more relevant category.
Transaction facts

How should repayments behave?

Card turnover alone does not determine the product. The repayment structure and total cost still need to fit the business.

1Repayments should flex with daily card takingsA merchant cash advance may be available, although cost should be compared carefully with other borrowing. 2The business prefers fixed instalmentsContinue to the secured or unsecured term-loan question.
Transaction facts

What does the business want to do with the asset?

The main distinction is whether the asset is being acquired, leased, refinanced or sold and leased back.

1Acquire it and own it at the endThe cost is spread over fixed instalments and ownership transfers after the agreement. 2Use it without taking ownershipThe appropriate lease depends on the intended term, residual-value risk and return arrangements. 3Release cash from an asset already ownedThe business keeps using the asset while borrowing against its value. 4Sell it and continue using itCapital is released through a sale while continued use is secured under a lease.
Transaction facts

What should happen at the end of the primary term?

This separates longer-use finance leases from fixed-period operating leases or contract hire.

1Continue using it or use it for most of its useful lifeA finance lease may be the relevant category. 2Return it after a fixed periodOperating lease or contract hire may suit a business seeking predictable use without disposal risk.
Relevant guide entry

Commercial Mortgage — Owner-Occupied

A long-term commercial mortgage is the main category to examine where the borrower’s own trading business will occupy the property.

Read this guide entry
Relevant guide entry

Commercial Mortgage — Investment

This is the main category where a commercial property is let to a third-party tenant and the rental income supports the borrowing.

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Relevant guide entry

Semi-Commercial Mortgage

A semi-commercial mortgage is the main category to examine where one property combines commercial and residential elements.

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Relevant guide entry

Bridging Finance

Bridging finance is the main short-term category to examine where there is a defined property funding gap and a credible exit strategy.

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Relevant guide entry

Auction Finance

Auction finance is specialist bridging finance structured around the contractual auction completion deadline.

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Relevant guide entry

Refurbishment Finance

This is the main category where finance is needed for acquisition and improvement works before sale, letting or refinance.

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Relevant guide entry

Development Finance

Development finance is the main category for ground-up construction, major conversion or other substantial schemes requiring staged drawdowns.

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Relevant guide entry

Development Exit Finance

This is the main category where a completed development needs more time for sales before the existing development facility is repaid.

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Relevant guide entry

Start with Auction Finance

The auction deadline drives the immediate facility. Once completion is secured, compare the Refurbishment Finance entry for the works phase.

Read the auction finance entryCompare refurbishment finance
Relevant guide entry

Start with Auction Finance

The auction deadline drives the immediate facility. Once completion is secured, compare the Development Finance entry for the construction phase.

Read the auction finance entryCompare development finance
Relevant guide entry

Secured Business Loan

A secured term loan is the main category to examine where a business needs a fixed sum and suitable property or assets are available as security.

Read this guide entry
Relevant guide entry

Unsecured Business Loan

An unsecured term loan is the main category to examine for a fixed funding need where no suitable security is available or preferred.

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Relevant guide entry

Invoice Finance

Invoice finance is the main category to examine where the cash-flow gap is directly tied to unpaid business-to-business invoices.

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Relevant guide entry

Revolving Credit Facility

A reusable facility is the main category to examine where the cash requirement rises, falls, is repaid and then returns.

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Relevant guide entry

Merchant Cash Advance

This route may be available where card takings are consistent and repayments need to flex with daily revenue. Total cost should be compared carefully with term loans and revolving facilities.

Read this guide entry
Relevant guide entry

Tax & VAT Loan

This is the main category to examine where a defined corporation tax, VAT or PAYE liability needs to be spread over monthly instalments.

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Relevant guide entry

Hire Purchase

Hire purchase is the main category to examine where the business wants to acquire an asset and own it after the agreed instalments are paid.

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Relevant guide entry

Finance Lease

A finance lease is the main category to examine where the business wants long-term use of an asset without taking legal ownership.

Read this guide entry
Relevant guide entry

Operating Lease / Contract Hire

This is the main category to examine where an asset is required for a fixed period and will then be returned, often with servicing included for vehicles.

Read this guide entry
Relevant guide entry

Asset Refinance

Asset refinance is the main category where a business wants to release cash from equipment or vehicles it already owns while retaining their use.

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Relevant guide entry

Sale and Leaseback

Sale and leaseback is the main category where an asset is sold to release capital and immediately leased back so the business can continue using it.

Read this guide entry
Property Finance
ProductWhat it isTypical useExample
Commercial Mortgage — Owner-Occupied
A long-term loan secured against a commercial property that the borrower’s own business occupies. Repaid monthly over 5 to 25 years. The lender assesses both the property value and the profitability of the business.
A trading business buying its own premises — an office, workshop, warehouse, or retail unit.
A joinery firm buys the unit it has rented for ten years. The lender advances 70% of the purchase price over 15 years, with monthly repayments replacing rent.
Commercial Mortgage — Investment
A long-term loan secured against a commercial property let to a third-party tenant. The lender assesses the rental income rather than the borrower’s own business profit.
A property investor buying an industrial unit, office suite, or retail premises to generate rental income.
An investor purchases a let warehouse for £400,000, borrowing 70% over 15 years. The tenant’s rent comfortably covers the monthly interest.
Semi-Commercial Mortgage
A mortgage on a mixed-use property — typically a commercial ground floor with residential accommodation above, such as a shop with a flat. The lender assesses both the commercial rent and the residential rental income.
Buying or refinancing a shop-with-flat above, an HMO above retail, or any property combining commercial and residential use.
An investor buys a high street takeaway with a two-bedroom flat above. The combined rental income from both elements supports the mortgage.
Bridging Finance
A short-term loan, typically 1 to 18 months, secured against property. It bridges a funding gap when a longer-term product cannot be arranged in time. The lender focuses on the property value and the borrower’s plan to repay — the exit strategy — rather than income or credit history.
Auction purchases, chain breaks, acquiring a property before a mortgage is in place, refurbishment before refinancing, or releasing equity quickly.
A client wins a property at auction with a 28-day completion deadline. A bridging loan completes in 12 days, giving time to arrange a commercial mortgage at leisure.
Refurbishment Finance
A bridging-type loan that also funds the cost of improving a property — from cosmetic decoration to structural conversion. The lender advances against both the current value and the projected value once works are complete.
Converting a property to a different use, improving a property to make it lettable or mortgageable, or funding an HMO conversion.
A landlord buys a vacant property needing a full refurbishment. The lender funds the purchase and releases money in stages as works are completed, then refinances to a buy-to-let mortgage on completion.
Development Finance
Structured lending for the construction of new residential or commercial property. Funds are released in stages as the build progresses, monitored by an independent surveyor. Interest accrues during the build and is repaid from sale proceeds or refinance at completion.
Ground-up new build, conversion of a commercial building to residential, or any significant construction scheme.
A developer builds six new houses on a plot. The lender advances up to 65% of the completed value in stages, and is repaid when the units sell.
Development Exit Finance
A short-term loan replacing a development finance facility once the build is complete. It gives the developer time to sell units at full market value rather than rushing to repay the development loan on its deadline.
A developer who has finished a scheme but not yet sold all units, and whose development facility is approaching maturity.
A developer completes 12 apartments with 8 sold. A development exit loan replaces the development facility, giving 12 months to sell the remaining 4 at the right price.
Auction Finance
A specialist fast-close bridging loan designed to meet the 28-day completion deadline that applies to unconditional auction purchases. Speed and certainty of delivery are the defining features.
Buying any property at auction where the buyer must complete within 28 days.
A client successfully bids £320,000 for a commercial unit at auction. The lender draws down within 10 days, well within the deadline.
Business & Working Capital Finance
ProductWhat it isTypical useExample
Secured Business Loan
A fixed amount borrowed over an agreed term, repaid in regular monthly instalments, secured against the borrower’s property or business assets. The security allows the lender to offer lower rates than an unsecured loan.
Capital expenditure, business expansion, or debt consolidation where property or assets are available as security.
A manufacturer needs £250,000 to fund a factory extension. The lender takes a charge on the commercial property and lends over 5 years at a competitive rate.
Unsecured Business Loan
A fixed loan repaid over an agreed term with no charge taken over property or assets. The lender relies on the business’s trading history, cashflow, and credit profile. Rates are higher than secured equivalents but the process is faster and simpler.
Working capital, short-term cashflow support, or small capital needs for businesses without property security or those who prefer not to encumber assets.
A recruitment agency needs £80,000 to cover payroll while a large invoice clears. An unsecured loan is approved within 48 hours against the firm’s trading history.
Invoice Finance
A facility that advances up to 90% of the value of unpaid customer invoices within 24 hours of raising them. The remaining balance, less fees, is paid when the customer settles. Available as factoring (lender manages collections) or invoice discounting (client manages collections, often confidentially). The facility grows automatically as turnover grows.
B2B businesses with slow-paying customers, growing businesses whose turnover has outpaced their overdraft limit, or any business replacing an overdraft with a more scalable solution.
A logistics company invoices £80,000 per month on 60-day terms but pays drivers weekly. Invoice finance releases funds within 24 hours of each invoice, eliminating the cashflow gap.
Revolving Credit Facility
A committed credit line that can be drawn, repaid, and redrawn repeatedly within the facility limit and term. The borrower pays interest only on what is actually drawn. Unlike an overdraft, it is committed for a defined period and cannot be withdrawn by the lender at short notice.
Businesses with seasonal or variable cashflow that need a flexible, reliable working capital buffer.
A garden centre draws heavily on its facility in spring to fund stock purchase, then repays through the summer and autumn as sales income arrives — repeating the cycle each year.
Merchant Cash Advance
An advance against a business’s future card takings, repaid automatically by deducting a fixed percentage of daily card sales. There are no fixed monthly payments — repayment adjusts with revenue. Cost is expressed as a factor rate rather than an interest rate.
Hospitality, retail, and leisure businesses with consistent card terminal revenue that need quick access to funds and flexible repayment.
A restaurant processing £25,000 per month in card sales receives a £20,000 advance. A daily percentage of card takings is swept to the provider automatically until repaid.
Tax & VAT Loan
A short-term loan designed to spread a large HMRC liability — corporation tax, VAT, or PAYE — over monthly instalments rather than paying the full amount in one lump sum. Applications are straightforward and funds are typically available within a few days.
Businesses facing a significant tax bill who want to preserve cashflow by spreading the cost rather than depleting reserves.
A limited company faces a £60,000 corporation tax bill. A tax loan spreads the payment over nine monthly instalments, keeping cash available for trading and payroll.
Asset Finance
ProductWhat it isTypical useExample
Hire Purchase
The most common form of asset finance. The finance company buys the asset and the business repays it in fixed monthly instalments over an agreed term. Ownership transfers to the business at the end. The asset appears on the balance sheet and the business can claim capital allowances.
Acquiring vehicles, plant, machinery, or equipment where the business intends to own the asset at the end of the agreement.
A haulage firm acquires two new HGVs at £120,000 each. Hire purchase spreads the cost over 60 months, preserving cash reserves for the contracts the vehicles will service.
Finance Lease
The finance company buys the asset and leases it to the business for its useful life. The business uses the asset as if it owned it but legal title stays with the lender. At the end of the primary term the business can often continue using the asset for a nominal rental.
Businesses that want to fund an asset without owning it, or where claiming the full rental as a business expense is preferable to capital allowances.
A printing firm leases a high-specification digital press. The monthly rental is fully tax-deductible and the firm can upgrade to a newer model at the end of the lease term.
Operating Lease / Contract Hire
A rental arrangement for a fixed period, after which the asset is returned. The business takes no ownership risk and is not responsible for the asset’s residual value. Contract hire for vehicles often includes maintenance and servicing within the monthly cost.
Vehicle fleets, technology equipment, or any asset where the business wants predictable all-in costs and no disposal risk at the end.
A field service business operates a fleet of 20 vans on a 3-year contract hire. Fixed monthly costs cover servicing and tyres. At the end of three years the vans are returned and replaced.
Asset Refinance
A loan secured against an asset the business already owns and has paid for. The lender assesses the asset’s resale value and advances a percentage of it as cash. The business keeps using the asset and repays the loan over the agreed term.
Releasing working capital from owned equipment or vehicles; restructuring existing borrowing; bridging a short-term cash need without selling the asset.
A construction firm owns a fleet of plant equipment outright. Asset refinance releases £150,000 against the fleet’s value, providing working capital for a new contract without disposing of equipment needed on site.
Sale and Leaseback
The business sells an asset it owns — typically a commercial property or significant equipment — to a finance company or investor, and simultaneously leases it back. The business receives the full sale value in cash and continues using the asset, making regular lease payments going forward.
Releasing capital tied up in a property or equipment without disrupting operations; improving liquidity; funding growth or an acquisition without bank borrowing.
A manufacturer sells its factory to a property investor for £1.2 million and leases it back on a 15-year lease. The £1.2 million is reinvested in new machinery while the business continues operating from the same premises.

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