At a glance
- Commercial mortgages are commonly associated with longer-term finance secured on commercial property.
- Bridging finance is commonly used for shorter-term property or timing requirements where there is a defined exit.
- Development finance is structured around property development or substantial refurbishment projects.
- Asset finance can help businesses acquire vehicles, machinery or equipment.
- Invoice finance may release cash tied up in unpaid business invoices.
- Business loans can provide funding for a range of qualifying business purposes.
This guide explains the differences without recommending one product over another.
Why businesses use commercial finance
A business may seek external finance because the timing of an opportunity does not match the cash it has available. That does not automatically mean the same funding structure is suitable in every case.
Common funding purposes include:
| Business objective | Finance categories commonly associated with it |
|---|---|
| Purchase business premises | Commercial mortgage |
| Purchase or refinance an investment property | Commercial mortgage or other property finance |
| Complete a time-sensitive property purchase | Bridging finance |
| Fund a ground-up development | Development finance |
| Buy vehicles, machinery or equipment | Asset finance |
| Release cash tied up in invoices | Invoice finance |
| Fund general business expenditure | Business loan, subject to lender criteria |
The table is a starting point, not a recommendation. A lender will assess the specific transaction, applicant and security before deciding whether it fits its criteria.
The main types of commercial finance
Commercial mortgages
A commercial mortgage is generally used to finance commercial property over a longer term. The property may be occupied by the applicant's business or held as an investment, depending on the transaction and lender.
Typical considerations can include the property, intended use, deposit or equity, business performance, rental income where relevant and the borrower's overall circumstances.
Bridging finance
Bridging finance is typically shorter term. It is often associated with situations where a transaction needs to complete before longer-term funding or another source of capital is available.
The planned method of repaying the bridge — the exit — is therefore an important part of the transaction.
Development finance
Development finance is intended for qualifying property development projects. Rather than treating the project as a simple property purchase, lenders commonly assess the development plan, costs, experience, projected end value and proposed exit.
Funding may be released in stages as works progress.
Asset finance
Asset finance is used to fund qualifying business assets such as vehicles, plant, machinery and equipment. Different structures can result in different ownership and accounting outcomes, so businesses commonly involve their accountant or other professional adviser where appropriate.
Invoice finance
Invoice finance is linked to a business's receivables. Instead of waiting for customers to settle eligible invoices in the ordinary course, a facility may provide access to a proportion of their value, subject to the provider's terms.
Business loans
Business loans are broader-purpose facilities. Their structure, security requirements, term and assessment criteria vary considerably between lenders.
Commercial finance types compared
| Finance type | Common purpose | Typical structure | Key transaction question |
|---|---|---|---|
| Commercial mortgage | Commercial property | Longer term, usually property-secured | What property is being funded and how will repayments be supported? |
| Bridging finance | Short-term property/timing need | Short term with defined exit | What is the credible exit? |
| Development finance | Development/refurbishment | Project-based, often staged | Are costs, works and exit clearly evidenced? |
| Asset finance | Vehicles/equipment | Linked to financed asset | What asset is being acquired and how will it be used? |
| Invoice finance | Working capital against receivables | Linked to eligible invoices | What is the quality and profile of the debtor book? |
| Business loan | General qualifying business purposes | Fixed or variable depending on lender | What is the purpose and repayment capacity? |
What lenders commonly assess
There is no universal commercial-finance approval formula. Different lenders have different risk appetites and policies.
Information commonly considered can include:
- 1Purpose of the funding
- 2Amount required
- 3Business trading history and financial performance
- 4Property or other security, where applicable
- 5Deposit, equity or contribution
- 6Existing borrowing
- 7Experience relevant to the transaction
- 8Repayment source or exit strategy
- 9Credit profile
- 10Supporting documents
A typical funding journey
- 1Funding requirement
- 2information gathering
- 3lender-fit assessment
- 4application
- 5lender underwriting
- 6valuation/due diligence where required
- 7formal offer
- 8completion
Not every transaction follows exactly the same route, and an introduction does not guarantee an offer or completion.
Commercial finance example scenarios
Scenario 1: buying an operating premises
A trading company wants to purchase the warehouse it currently rents. That requirement is different from a developer purchasing land for construction, even if the values are similar.
A longer-term property facility may be relevant to explore because the underlying objective is to own and occupy commercial premises.
Scenario 2: completing before longer-term funding is ready
An investor has a property transaction with a fixed completion date but their intended longer-term arrangement cannot be put in place in time.
Short-term property finance may be considered, but the repayment or refinance route needs to be credible from the outset.
Scenario 3: acquiring new equipment
A company needs a new item of plant to expand capacity but does not want to pay the full purchase cost from working capital.
Asset finance may be one category to investigate because the requirement is tied to a specific business asset.
Information versus advice
Explaining how products generally work is different from advising a business that a particular facility is suitable for it.
Bridge's role is to gather information about a funding requirement and, where appropriate, make introductions. It does not tell applicants which product they should choose and does not guarantee that funding will be available.
If you want to organise the key information about a potential requirement, you can use the funding readiness assessment.
Key takeaways
- Commercial finance is an umbrella term covering several distinct forms of business funding.
- The purpose, asset, timescale and repayment route help determine which categories may be relevant to investigate.
- Commercial mortgages, bridging, development and asset finance solve different problems.
- Lenders apply their own underwriting and eligibility criteria.
- An introduction is not a recommendation, approval or guarantee of finance.