A relatively young enterprise that doesn’t have a track record of success may not be looked upon favourably by banks. Lending decisions for this type of situation will be based on risk. A lack of financial history doesn’t help a business loan application, so for those who still want to go through the bank they use for transaction accounts, a personal loan could be the way to go.
The downside may be slightly higher interest rates and lower loan amounts, but a personal loan can provide a good buffer for start-ups and application is relatively easy. For anyone who wants to start a new business, our suggestion is to continue working in PAYG, work on the business during weekends and secure a personal loan. Lenders want to see at least two years’ worth of company tax returns, which new businesses are unable to provide.
Private funding is when individuals lend generally through a trust account. While it can be a little more costly than the average business loan, it carries the advantage of flexibility.
If it’s a ridiculously difficult deal to put together, with no banks wanting to touch it due to not having the appropriate documentation or being outside LVRs, then private funding would be an option. Speaking to a broker who has experience with private lending is highly recommended. As a consumer, you’re kind of flying blind and you need to know that they’re going to be trustworthy.”
Raise the money
Crowdfunding can help raise the funds needed to finance a startup or a product. The two main types are equity crowdfunding, where a share of the business is offered in return for funds, and rewards crowdfunding, where a product or service is pre-sold prior to the launch of the business or product.
While it may seem like the most hassle-free approach, with no applications or forms required to be filled out, it does entail high risk. According to crowdfunding platform Indiegogo, the success rate for small businesses is extremely low, with only 3.1 per cent reaching their goals in 2015.
Talk to a broker
Skipping the banks entirely and talking to a commercial finance broker means gaining access to myriad finance products and loan types, as well as expertise in matching your needs to the right loan type. An experienced finance broker can take a broad view of a business’s finance, assist in business planning, and use their deep knowledge of a client’s needs to look beyond a simple ‘lowest interest rate’ formula in selecting a finance product, ensuring that business owners have access to the capital they need, when they need it.
Securing finance is imperative for a business’s prosperity. A Maverick Finance Broker can assist with business planning and finding the right type of finance to support growth and success.