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5 Reasons You Should Apply for a Business Loan

Loans can be a saviour in times of needs. If you’re in Australia, then you might already be under a lot of debt since Aussie household debt is said to be the highest in the world. People are used to applying for loans to make their ends meet, which is why personal debt is pretty high in the country. However, the scenario is not very different in the business sector either as businesses also commonly apply for loans in Australia.   Many experts are trying to educate people about the side effects of loans, especially business loans, as failing to pay back loans can cause you to lose your entire business. While loans do have their own side effects, there is no denying the fact that they come with benefits as well. Business lending experts Unsecuredbusinessloans.com.au say, “You can draw down funds for any purpose, but it’s best to keep the balance to a minimum as interest is usually calculated daily. It’s ideal for covering short-term gaps in your cash flow”. The key lies in knowing when to apply for a loan. To help you in this regard, given below are five instances where it is acceptable and justified to apply for a business loan.   1. To Purchase More Inventory If your business has selling potential then you should make good use of it by buying more inventory to increase output. This is a good option because increased inventory means increased products, which would result in increased revenue due to a jump in sales. However, this will work only if you are able to sell all the extra units you produced. If you are sure of a jump in sales, then applying for a loan to buy more inventory can be a good option. However, be sure of the reliability of the numbers as at times the jump is only temporary due to seasonal changes and other such reasons. Moreover, make sure to pick a loan at a low-interest rate so that you do not have to pay a huge amount of your revenue in interest. Note: Loans to meet a big order can also be a good idea as it can help you make new customers and grow your business.   2. To Move to a Bigger Office If your business is growing then you would need to hire more people, for which you will need a bigger office space. For this, you will need money, especially if you intend to buy a new space, which is more expensive than moving to a rented office. Do some research to find what’s more economical for you (buying or renting). Both options come with their own benefits. Also, remember that you’ll have to buy more furniture and spend on other items as well when you move to a bigger office, hence a business loan can be a good option.   3. To Buy Equipment For Your Business Equipment financing is pretty common in the business world. In fact, there is a special type of loan just to buy equipment since no business can work without quality equipment. If your old equipment is dying out or if you need to buy new equipment to increase production then you must opt for a business loan. Equipment financing is a good option in this regard as the equipment will be paying for itself.   4. To Clear Your Pending Bills You can apply for a loan to get rid of your pending bills to avoid the surcharge. However, this works only if the interest amount is lower than the surcharge. Note: Do not apply for new debt to clear the old debt. That’s a trap.   5. To Build Credit History For The Future Banks often require a good credit history to approve loans. Applying for a loan just to improve your credit history can be a good idea, especially if you intend to apply for a big one in the future. However, do this only if you’re sure of being able to pay back the loan on time. Apply for loans, but carefully!  

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5 Things You Must Do Before Applying for Finance

Given all the various finance options available and the complex matrix of requirements associated with getting approved, it would be a rather lengthy exercise going through every scenario. That said, it is worth having a basic checklist of the basics which will be required in almost all circumstances. 1. Register for GST There is a lot of discussion as to whether a small business should register for GST. If the business intends to borrow money now or in the future, it would be best to register for GST as soon as possible. For most small business financial providers -- this is a requirement. 2. Prepare & Confirm Company Details This may sound like stating the obvious, but it very important that the information you submit about you and your company can be correctly verified. Check and document the following: Company registered and trading addresses, phone numbers, email address, contact names, ABN number, and trading name. If owned by a trust, get a copy of the trust deed and document beneficiaries. Document director’s details as above and ensure they match current photo identification such as driver’s license. 3. Review Company & Directors Credit Report Any individual and or company can request a copy of the same credit report the financial institutions will be examining when assessing a credit application. It is strongly recommended you obtain a copy and review to ensure all details entered by third parties are correct. If you find any errors, you are entitled to dispute the entries with either the credit rating agency itself or the party which added the entry. It is in your interest to rectify or resolve any discrepancies prior to submitting an application for credit. Simply stating that a record is in dispute does not help. 4. Prepare the Financial Accounts For smaller amounts with some lenders, this may not be required. However, it is a good idea to have them ready. As a rule of thumb, you will need a full set of accounts for the previous financial year which have been audited or backed up with the signed corresponding tax return -- along with the year to date management accounts. It will help if year to date accounts are backed up with BAS statements. 5. Prepare Directors Asset & Liability Statement As directors personnel guarantees are a requirement for borrowing in the SME market, getting directors A&L declaration right is important. However I think it is best to understand why first. The misconception is that it’s all about demonstrating enough net assets to cover the debt in the event the business fails. There is some truth to that but not the real issue. Lenders want to see that the director is stable financially and therefore committed to the business. If after reviewing the company, they feel they may have to go after personnel assets at some stage they will not lend in the first place. That being said when preparing the statement ensure that all valuations on the assets side are realistic and title lies with the applicant and all liabilities are disclosed as this will all be scrutinized in the credit process.

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5 Ways to Fund Your New Small Business

Funding is difficult for almost all startups, so how can yours get some? There are several ways such as government and non-government grants. Bank loans or small online lenders while not ideal, are other possible methods. Finally, private financiers and business/tax incentives can also help your business get the capital it needs. ​​ Starting a new business can be a wonderful but pretty stressful endeavor. More often than not, the story goes something like this: slowly but surely you are getting sick and tired of working for someone else. After a period of being stuck in limbo, you decide to dust off that idea that has been in the back of your mind for ages. Or perhaps you have a light bulb moment, you see the perfect opportunity and decide to grab it. And then, everything screeches to a halt, because where on earth are you going to get the funding? Government and non-government grants The Australian government has shown an admirable dedication to supporting small businesses. At any given moment there are dozens of opportunities for grants, be they federal, state, or even non-government funded. If you happen to be successful in securing one of these, they can actually account for up to 80% of the funds you need. Government grants are so numerous, they are divided into categories, and a neat breakdown is offered on the Federal Government website. If you get one of these, in most cases you aren’t expected to repay it but will need to complete audits and write regular reports, as per the requirements. Bank loans A bank loan, although not ideal, is a very popular option. Of course, when getting a bank loan, always do your research and don’t be afraid to shop around. If you don’t want your business to collapse under debt, you need to be careful to find the best deal available. Many of Australia’s leading banks have decided to support small businesses by offering low-interest, or even zero-interest unsecured loans. It goes without saying that you will not want to rush into any kind of a loan that might turn out to be too expensive for you down the line. This is why you will always want to compare as many loans from as many banks as you humanly can. Only once you are certain that this loan makes sense for your future SME should you take it out. Private financiers Maybe you have your own savings, the money you have been putting away for a rainy day. Or perhaps some of your friends or family members are looking to invest. Think about the people around you who have cash, and might be in need of a solid investment opportunity. If none of them are willing to take the risk with you, and you think you truly have a revolutionary idea on your hands, why not ask the people, your potential clients, and customers, whether they would be willing to fund you. Crowdfunding platforms like IndieGoGo and Kickstarter have become a veritable source of investment capital for small business. You might be surprised to find out just how much money can be raised with a successful crowdfunding campaign if enough people believe in your project. The biggest problem with crowdfunding campaigns is that they tend to favour startups and companies that are coming out with innovative and revolutionary products. If you are looking to open something more down-to-earth, you might discover that crowdfunding does not work as well. Small online lenders Those who might balk at traditional loans, or fail to meet the requirements (for instance, those with a less than stellar credit score), can always turn to smaller lenders. Companies like ALC Commercial specialize in providing small business owners the financial support they need. In comparison to banks and other sources of funding, online lenders also have another advantage: they are fast. Unlike with a bank loan, the approval process and transfer of money is typically much shorter and only lasts a few days. Business and tax incentives If money is tight, it’s probably worth it to look into different incentive programs offered by the federal government. For instance, insurance against business risks is something any business could use. And tax reimbursements and payroll rebates could be just the thing that makes the difference and pushes you into the black. Maybe you don’t have enough in savings, or maybe you feel insecure about risking everything and putting your retirement money on the line. While finding the money to start a business is by no means an easy task, it is far from impossible. If you think you have a solid idea, the courage it takes to go at it on your own, and the perseverance and work ethic it takes to make it, don’t let the problem of funding bring you down. Think of it not as an insurmountable obstacle, but your first step toward financial independence.

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7 Questions to Answer Before Applying For a Business Loan

You need to understand a few things before applying for a business loan and whether it is right for your business. Research the loan type, repayment, interest rate, tenure and work out all additional fees and charges. Get your documents ready to avoid any delay and to increase the chances of a successful application.   If you’re considering getting  for a business loan, it’s best to be as prepared as possible. You will need to research and understand as much as you can about how your business loan can help achieve your goals. Below are some of the questions you need to ask yourself before applying for a business loan.   1. What is the purpose of the business loan? This is an important question as you need to be as clear as possible about why you are borrowing the money. A lender will always ask you this question and some of the most common answers include: To grow your business To help manage cash flow To buy a large asset such as a vehicle or equipment   2. How much do you need to borrow? Remember that need and want are two different things. You must be clear on this and work it out beforehand by drawing up a budget and if you need to, use an online loan calculator to help you figure out things such as repayment schedules and costs. Generally, if you’re looking for a business loan to buy an asset, you’ll know how much you need to borrow. Otherwise, it’s up to you to do some sums.   3. How much can you afford to repay? You need to factor in what your repayments will be and remember that these will include interest rates and possibly additional fees. Work out how long you need to make these repayments as this will affect the length of the loan term. Don’t overstretch yourself financially as you don’t want to default on payments, pay late or miss payments. This will damage the credit rating of your business which could dampen the chances of future borrowings.   4. What type of loan do you want? It's important to choose between a secured or an unsecured loan. Both have pros and cons and the right choice for you will depend on several factors in your situation such as: what you are using the loan for your ability to pay the loan back whether you have any assets to offer as collateral   5. Do you want a fixed or variable interest rate? Again, this will depend a lot on your individual situation because it will affect the amount of your repayments, so you’ll want to think carefully about the right option for your business. With a fixed rate interest loan, your lender will take on the risk if interest rates go up or down, whereas with a variable rate, it’ll be up to you – for better or worse! Generally, a fixed rate is best if you’re on a tight budget and need to know exactly what you’ll be paying each month.   6. Do you have all the necessary documents ready? There are quite a few documents you’ll need when you apply for a business loan. One of the most important is to have a detailed business plan available for a potential lender to study as this will help them to understand the direction your business is going and any projected financial forecasts. Being organised and having your documentation ready can help to avoid any unnecessary delays in finding the right business loan for you.   7. Do you understand all the fees and charges you’ll need to pay? Always check and budget for additional fees, charges and due dates on your business loan before you sign on the dotted line. These could include fees such as: ongoing monthly fees establishment fees early repayment fees It’s always good to know as much as possible before you commit to getting a business loan. Do your research, get organised and make sure you’re 100% happy with the loan before you go ahead with taking your business to the next level.

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Are banks lending to SME's?

A good deal has been written recently regarding the attitude to SME lending by the major banks. On the one hand, we have SME owners frustrated by their inability to attract bank funding and on the other, we have the banks advertising and talking up their preparedness to fund SME’s. Why do we have this disconnect between views? Clearly, since late 2008 and the commencement of the GFC, banks have been warier of lending. The financial crisis – caused largely by risky lending and banking mismanagement – combined with subsequent higher liquidity and capital requirements have made for a far more risk adverse approach. However, banks are lending and they are increasingly keen to do so. They are lending less than they used to and looking for tighter security, but the idea that they won’t lend to anyone is simply not true, but you must submit a well-reasoned, structured, quality application. This myth is not only hurting the banks, but it is hurting SME’s. A problem is that we hear so many negative stories of loan applications dragging out for weeks before amounting to nothing and of bank BDM’s being excited by your application only to have it knocked back by credit that many established businesses with sound bankable propositions are not even applying for funding. Other SME’s will get a rejection from one bank and assume they fall into the ‘do not lend’ category, and give up – whereas in a more positive climate, they might keep trying. This is slowing business growth and therefore the growth of Australia’s economy. Why is everyone saying that ‘banks aren’t lending to SME’s’? To answer the question we need to understand the lending process and rationale applied by the banks. Decisions are no longer made by your local manager who in days gone by would have known you, your business and the state of the local economy in which you operate. Lending decisions are now centralized and subject to stringent internal rules, guidelines and matrix ratings. It is possible in this centralized and semi-automated system of credit approval to fail simple because you can’t “tick” a given box. So let’s look at some of the actions you can take to improve your chances of success: Credit History: In tough times banks require a near perfect credit history with no defaults, judgments or slow payments showing on your credit history. The reporting agencies make mistakes and many suppliers make mistakes so it pays to request a copy of your credit file from the main agencies such as Veda or Dunn & Bradstreet and check that it is accurate. Recently our Credit Manager brought a large monthly trading account application to me for approval, the applicant trades nationally and is at the upper end of the SME definition. On the credit file were two very small sums of money showing as outstanding for over two years to a major utility company. Had I been a computer I would have rejected the application but as a reasoning person I could accept that such small sums were inconsequential against the annual revenues of the applicant. A quick conversation with the applicants CFO satisfied me and the application was approved. For a relatively modest annual fee the reporting agencies will provide you with email notification of any changes to your credit file and provide a fully detailed up to file each year. Portfolio Risk: Most banks from time to time place a limit on the amount of funds they will advance into a certain business sector or avoid some sectors all together. In late 2010 we had a client with a strong business case and sound backing who wanted to acquire assets in the wine industry. At that time none of the major banks would lend to any “non existing” wine industry clients. Don’t be afraid to question the banks BDM as to their attitude to your sector and if the BDM doesn’t know ask them to find out. Business Plans, Budgets & History: Being able to table a well-constructed funding application supported by a current business plan, detailed budgets including P&L, Balance Sheet and Cash Flow will help enormously and if you have maintained accurate records of plans and performance over the past three years even better. The plans and records don’t just show how your business has performed and how it may perform in the future they speak volumes about you as a thinker and manager. It’s relatively easy for you to know how you stand from a profit and cash position on a monthly basis and you may question the time and investment required in maintaining such detail but believe me it will pay you dividends time and again to do so. Management Team: Provide information about your management team. This will be a key consideration for any lender. You need to show you have a team that can develop the product, market and sell it, and just as importantly, manage the finances. If you have gaps in your team, try and fill them get one in place before you apply. Interest Rate Cover & Security: The banks will calculate how many times cover your current net profit will give to the total amount of interest payable and they will want that cover to be 2.5 – 3.5 times as a minimum. For additional security the banks will look at your stock and debtors and advance funds against that security, again they will be conservative and depending on the age and condition of stock may lend 60% of cost and up to 80% of debtors. The bank will also look to take a charge over the various assets of your business. As a general policy you should, wherever possible, avoid giving personal guarantees or security over your family home and always seek professional advice before executing any loan documentation. Amortization & Exit: An often over looked point which the banks will be very interested in is how quickly can you repay or amortize the loan and how you plan to do it. The banks don’t want open ended facilities and they want to know you have more than one option to repay, irrespective of anecdotal reputation banks do not enjoy having to collect on defaults. Hopefully you will be able to demonstrate an ability to amortize the loan over a reasonable period whilst still leaving sufficient cash flow to cover your interest ratios. In summary the lending market is constantly changing and hard to keep up with. For this reason it’s often  worth engaging one of the companies that specialize in SMS funding as they will have strong relationships with a variety of lenders, understand each banks current requirements and how best to structure and present your application to provide the best prospect of success.  

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Crowdfunding For Your Startup: Your Best Option

If you are starting a new business but don't have the funds in your pocket, neither you have the desire to go chasing banks for a loan, you have one more option to consider before giving up. Crowdfunding for business startups is one of the most popular fundraising strategies now used by thousands of startups and ordinary people. Find out why and learn how you could benefit from crowdfunding for business startups in your own entrepreneurial activities. The traditional method of financing a business used to be applying for a bank loan, self-financing through small-scale borrowing or finding investors. Now, thanks to the rise of crowdfunding platforms that give new business entrepreneurs the option to simply ask the public at large to contribute to the costs of building a startup, things are considerably different. In some respects, they are easier. In others, they are somewhat more difficult. How crowdfunding for business works Setting up a crowdfunding campaign is relatively simple. The business or entrepreneur sets a funding goal and fundraising strategies and offers rewards for individuals to contribute in various categories from small amounts up to larger amounts. Crowdfunding for business startups can be thought of in two ways. One, it is a business offering products for pre-order. On the other hand, it is contributors investing without obtaining equity. People who contribute to crowdfunding for business campaigns are generally more interested in seeing the vision become a reality than they are in owning part of that vision. This is what fuels the desire to buy a product that hasn't been created or manufactured yet. Many contributors feel they are a part of something unique and special if they buy on the promise that product will soon be released. What businesses can expect from crowdfunding As one of the many fundraising strategies, crowdfunding for business startups has been a spectacular success. Crowdfunding platforms like Plumfund have raised tremendous amount to support everything from worldwide travelogues to video games to weddings. Although it may seem like this is a rather simple way to obtain large sums of money, there are some catches. Contributors will expect to have their rewards delivered in a timely manner. Also, since the business launching the campaign must announce their goal, the contributors will expect that goal to be reached and also to deliver everything the business promised. What kinds of businesses can use crowdfunding? According to Business News Daily crowdfunding for business startups on larger sites isn't always guaranteed, so it is always a good idea for any entrepreneur to do their homework before starting a campaign. Crowdfunding for business startups works best on projects with a well-defined goal. Products like video games, films, books, manufacturing prototypes and so forth are very easy to announce as complete. Projects will less well-defined finish lines are somewhat more difficult and often require a bit more work. While crowdfunding for business is by no means a universal solution, it does provide a fair amount of flexibility and power for entrepreneurs that don't fit neatly into the criteria for other funding sources. It is well worth a few minutes of research and consideration for most small businesses. Have you considered crowdfunding for business the possible best option for you? Maybe it is.

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Financing Your Business Growth: Loans, Leases and More

Businesses either fail, stay in the same place for years, or they continuously grow and expand. There are reasons behind these patterns. Business growth needs finances in order to ensure that growth through expanded premises, more resources, new machinery, etc. With these financial responsibilities to guarantee your successful business growth, there are some tax and financial subtleties you should know about. As your business grows and expands, you will face choices as to how that growth is financed. In some cases, the business may be sufficiently profitable that future growth plans can be financed from internally-generated capital. In most cases, it will be necessary to look to external finance in order to secure the funds your business needs to grow. Among the areas you might be looking to finance are: the acquisition of new and bigger premises, or an extension to existing premises, the acquisition of new plant, equipment, fixtures and fittings, taking over competitor businesses through mergers and acquisitions, and development of new product lines. If you borrow money to finance the growth of your business, interest paid on that finance will generally be tax deductible, provided all the borrowed funds are used for business purposes (you’ll need to apportion the interest if some of the finance is used for private or domestic purposes). Loan payments consist of 2 elements: the repayment of the principal, which is a capital expense and not deductible, and the interest element (cost of finance), which will be deductible where the loan is for business purposes. Interest is deductible immediately even where the borrowed funds are used to acquire capital assets, such as property or plant. Costs incurred in arranging a loan are also deductible by the business, as are costs incurred in discharging a loan. That might include: loan procurement fees, guarantee fees, legal costs, stamp duty, valuation fees, survey fees, and underwriters fees. No deduction is available if the finance doesn’t go ahead. Financing asset purchases for the business In many cases, you’ll want to raise finance to acquire new assets to use in the business, such as plant or machinery. In some cases, you’ll borrow money to acquire the asset and in others, you’ll lease the asset. The distinctions between buying an asset using hire purchase (HP), taking out a finance lease and taking out an operating lease can be quite subtle, but the tax treatments — and the legal obligations and responsibilities imposed on your business — can be very different, depending on which route you take. Hire purchase contracts If your business acquires an asset under a hire purchase contract, you will acquire full legal ownership of the asset, subject to any security on the asset put in place by the lender. For tax purposes, the following deductions for assets financed under an HP contract can be claimed: the interest component of the HP payments, repairs, and depreciation on the asset from the date of the HP contract. Finance leases If your business takes out a finance lease on an asset, your business will take on many of the risks and rewards of ownership of the asset without, initially at least, taking on legal ownership. Typically, after paying the lease payments for the duration of the term, your business will legally acquire the asset by paying out the residual payment to the lessor. Until that point, the entity leasing the asset to your business will be the legal owner. For tax purposes, lease payments made under a finance lease are immediately deductible. In addition, as your business will be responsible for keeping the asset in good order, any repair or servicing costs will also be tax deductible. Your business can’t claim the depreciation on the asset — the entity leasing the asset to you will claim that. Operating leases If your business takes out an operating lease on an asset, it is basically renting that asset from the leasing entity, which retains ownership of the asset. In many cases, this can be an attractive option. Because the risk of ownership remains with the entity renting the asset to your business, you avoid any of the risks of obsolescence and don’t have to worry about maintaining the asset or repairing it if it breaks down, since the lessor is usually responsible for all those costs. For tax purposes, payments made under an operating lease are immediately deductible in the period to which they relate, provided the asset being leased is used in the business. As noted above, servicing and repairs will often be included in the headline rental cost but if charged separately, they will also be deductible. How do you intend to finance YOUR business growth in the future?

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How to get a Business Loan with Bad Credit

If your business has bad credit, you can still get a business loan approved. Approach smaller lenders, have a solid business plan and never overstretch yourself financially. Get expert help who can research all the available loans and help prepare your business loan application.​   Getting a business loan can be tough, and with bad credit it can often feel impossible. Don’t worry though – there are ways to get a business loan with a bad credit rating. It shouldn’t stop you from achieving the goals you have for your business. Although there may be several reasons for your bad credit rating, doing your research and finding the right lender for you can increase your chances of getting your business loan approved. What you need to know: There are different loan options for you such as secured business loans and loans offered by small lenders, rather than big banks and institutions that are more risk averse. A detailed business plan and strong set of financial forecasts can really help you when trying to get a business loan with bad credit. A poor credit rating is actually much more common among business owners than non-business owners, so you’re definitely not alone!   How to get a business loan with bad credit Generally, you’ll want to approach smaller or non-traditional lenders rather than the big banks and financial institutions. Alternative lenders have a more relaxed criteria for business loans and you’re less likely to be rejected due to bad credit. You should also consider secured bad credit business loans. You can use your assets, whether they are vehicles, properties or savings, as collateral to increase your chances of a lender approving your business loan. Make sure you research thoroughly and shop around. If you need expert help, go for it. They can do a better job of researching to find you a better deal for your business. It might take a bit more time, but it’ll be worth it in the end.   Other questions about business loans with bad credit You may have quite a few questions about getting your business loan with bad credit but these are some of the most frequently asked: What do you need to apply? This will depend on your individual lender but almost all of them will want to see your business financials before they decide on whether to approve your loan application. How about using a personal loan for business finance instead? This is an option, but it doesn’t usually give the flexibility of a business loan, so it’s probably not ideal as a first option. How should I purchase the equipment I need? You need to think about whether you want to purchase the equipment using a loan or simply lease the equipment. There are different options for both, but it’ll depend on how you plan to use the equipment, how long you need it for and how you intend to pay it back.   The way forward Getting a business loan with a poor credit history can be the first step towards building a successful business and turning your finances around. It’s vital that you don’t overstretch yourself and your business financially, so budget carefully and always make sure that you’re realistic with your repayments, and always pay them on time and in full.

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