There are different types of business loans to suit different stages of a business lifecycle and different business needs and selecting the right one can speed up the application process and minimise costs.
Finance for a start-up
For a start-up company with no trading business or cash flow, it can be quite difficult to secure a business loan. An alternative is to take out a loan using the equity of your home or property.
“A lot of the banks don’t have much of an appetite for start-ups, so a home loan would be a good alternative for anyone wanting to fund a new venture,” says Mark Grange Liberty Financial Adviser – Brilliant Home Loans. “It provides flexibility and you could be more likely to secure approval, it is important that you consider how your future income will be impacted and disclose this to the lender.”
If your start-up is part of a franchise some lenders may have already completed assessment on the business and have criteria and policy in place that they will lend around.
Fintechs
This is a relatively new term combining FINance & TECHnology to assess your suitability for a loan without the need to supply financials, tax returns etc. The process is a lot faster than applying for a loan with a bank and can typically be funded within 24-48 hours and can have loan amounts up to $250K with repayment terms up to 2 years
Finance for quick cash flow
Similar to a line of credit, a business overdraft can be drawn down to a certain limit, it is specifically a commercial loan that is priced accordingly - and more favourably for the business. A great option for those unspecified cash flow requirements that go with owning a business, it provides the flexibility of accessing funds based on the previous trading history.
“There are a lot of unknowns that arise in business that even the best business plans can’t cater for,” says the Adviser. “This type of financing takes care of those unforeseen things.”
Finance for expansion, buy out of a partner or investment
Aimed at funding long-term investments, term loans are ideal for business expansion. They’re fully drawn advances for a fixed length of time with scheduled repayments. Normally secured against an asset, term loans are commonly used for purchasing new equipment or moving to larger premises.
There is also the option of lease finance for those who require equipment upgrade but don’t particularly want to own it. “Lease finance is typically used for office equipment, photocopiers and such that you don’t need to ultimately own because it gets superseded,” advises the Adviser. “Anything that requires a continued trade up to a new model.”
Regardless of what kind of business you are financing, it’s always important to have a good business plan. “Try to have an accurate cash flow forecast and implement a good exit strategy,” the Adviser says. “Lenders want to see what you would have in place if things don’t go to plan; that’s how they make their decisions.”
MFAA accredited brokers like Mark Grange can assist with business planning and finding the right type of finance to support growth and success. For all of your commercial finance questions contact Mark Grange Liberty Financial Adviser – Brilliant Home Loans Today
www.brillianthomeloans.com.au
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