Commercial Finance

Commercial finance refers to a broad range of financial products and services tailored to meet the funding needs of businesses. Unlike traditional commercial banking, which primarily focuses on accepting deposits and providing loans, commercial finance involves a more specialized approach to address the diverse financial requirements of businesses.

Commercial finance encompasses various financial solutions beyond simple loans, including:

Asset-Based Lending (ABL): This involves providing loans secured by the borrower's assets, such as accounts receivable, inventory, or equipment. ABL allows businesses to access capital by leveraging their existing assets as collateral.

Invoice Financing: Also known as invoice factoring or accounts receivable financing, this option involves selling unpaid invoices to a financial institution at a discount in exchange for immediate cash. It helps businesses improve cash flow by accelerating the collection of receivables.

Equipment Financing: This type of financing allows businesses to acquire equipment or machinery without paying the full purchase price upfront. The lender provides funds to purchase the equipment, which serves as collateral for the loan.

Commercial Real Estate Loans: Commercial finance providers offer loans specifically for purchasing, refinancing, or developing commercial properties such as office buildings, retail centers, and industrial facilities.

Trade Finance: Trade finance includes various financial instruments and services designed to facilitate international trade transactions, such as letters of credit, export financing, and trade credit insurance.

Supply Chain Finance: This involves optimizing cash flow along the supply chain by providing financing solutions to suppliers or buyers, allowing them to better manage working capital and improve liquidity.

Merchant Cash Advances (MCAs): MCAs provide businesses with upfront cash in exchange for a percentage of future credit card sales. It's a form of short-term financing commonly used by retail or service businesses with fluctuating revenue streams.

Commercial finance providers may include commercial banks, specialized finance companies, private equity firms, and alternative lenders. These institutions assess the creditworthiness of businesses based on various factors such as financial statements, credit history, and collateral. Commercial finance plays a vital role in supporting business growth, managing cash flow, and financing specific projects or initiatives.

New York City often has been known as the principal situs of the financial industry in the USA, due to the presence of major commercial banks (so called money center banks), the New York Stock Exchange, the NASDAQ, etc., although this is starting to change. Corporate Finance Elsewhere. 

Compare with Investment Banking.

See Secured Lending, and History of Banking Regulation in the USA.

See also Securities, Securities Regulation, Broker-Dealer, The Securitization of Assets, and Accounting.