Australia is ranked as having the largest median wealth in the world. The country also has an effective system that promotes vibrant entrepreneurship – as it upholds the most transparent and efficient regulatory procedures to launch a business. With the current robust economy, it is indeed the best time to follow the path of being an entrepreneur.
With a conducive arena to start and run a business, it also comes with its own challenges. Before you jump right in and execute plans to expand, here’s a guide we prepared for you to tackle the common issues in growing a small business in Australia.
1. What are the signs to look for before you expand your small business in Australia?
So now you have launched a business and had it running for a few months. How will you be able to make things even better and expand? Here are the key factors to consider before scaling up your business.
You have a good team as the backbone of your business
One thing to consider when expanding a business is having the right staff to accelerate growth. Your team is what keeps your business going. With the right team members focused on achieving the purpose of your venture, you’re off to a good promise of increasing your output, sales and profits. Make sure you have good people helping you at work, and promote a positive work culture for your business to thrive for years to come.
You have a loyal customer base
Amongst all other things, you must have a steady flow of customers. If you’re customer base is growing, or you are already fielding requests for more products to sell, this may be a prime time for you to grow your business into something bigger. How do you foresee your business to be successful in the industry? What is your desired revenue or profit within a year? Your answers to these is like starting with the end in mind. Then you can move backwards as to how you’ll accomplish these goals one step at a time.
You’re realistic about what you can handle
Let’s say you are earning $15,000 per month in your small business and you want to double your profits within the next few months. What are the things you need to purchase, implement or accomplish in order to achieve that growth? Are you ready to take in the time and effort needed to grow your business the way you dream it to be? Remember that you also have to consider time for yourself, your family, and other factors before committing to even bigger dreams in business. Be realistic as to how much you can handle, and how feasible your business projections are.
You’re achieving your business goals
You have to prove that you are meeting defined targets and objectives to build internal and external confidence in your company. For example, if you plan to reach 2000 targeted customers in a month, and your team was able to achieve more of that target for several months, then you’ll have the numbers to confidently show investors for them to support you.
You have the cash flow needed to expand
You won’t be fully prepared to grow your business if you aren’t in a position yet to carry the business until the sales catch up with the investment. You need to have positive cash flow to drive your business even higher. You won’t be in the right mindset to expand when your cash flow is in the red.
2. What are the common challenges of expanding a small business in Australia?
Australia may have one of the most robust economies in the world, but it isn’t a pristinely perfect setting for the regular entrepreneur. Take a look at the following issues which may affect your business in Australia.
Slow internet speeds in Australia may be due to the government abandoning a lightning fast fibre-to-the-premises roll out (FTTP) and favoring a fibre-to-the-node (FTTN) system. This system relies on the existing copper wire to deliver internet to everyone. Business owners have already voiced their complaints of how slow the internet is, which have cost their businesses thousands of dollars.
Limited Cash Flow
According to a report published by the Australian Securities and Investments Commission (ASIC), 41% of business owners account inadequate cash flow or high cash use as a point of failure in business management. 32% of businesses are trading at a loss and 33% are experiencing poor financial control. Financial management and proper record keeping are crucial to manage a business and make it thrive.
Pay to Play in Marketing Online
It’s getting more and more difficult for small business owners to gain organic reach in social media platforms such as Facebook because online giants are prompting business to pay more for promotional posts. To put your promotions on the fast lane, you’d have to pay for ads regularly to get your products and services seen by a targeted audience. This adds extra costs in running a business, and relying on organic traffic alone will take a long time to drive results.
There are many small businesses owners that don’t pay themselves superannuation. Business owners rely on the hope that their retirement will be funded by what they’ll earn after selling their business. Small Business Ombudsman Kate Carnell says that the super balance of owners is unlikely to be sufficient. Many businesses are not growing at a profitable rate, which leaves entrepreneurs concerned about their retirement.
The Myth of ‘Physical Retail is Dead’
If you are worried about bricks-and-mortar shops failing in the current economy that favors online marketplaces, even more, remember that physical retail isn’t dead (but boring retail is) as aptly stated by Steve Dennis, LinkedIn Retail Influencer and President of Sageberry Consulting.
What retailers or business owners need to know is that they have to evolve quickly in the ever-changing market landscape. They have to put a focus on providing a great customer experience in a physical store that cannot be done through eCommerce sites. Bricks-and-mortar businesses can still thrive if they continually innovate through omnichannel selling and a well-rounded customer experience. People will still go to physical stores for that much needed instant gratification that no online store can give.
3. Supporting the Growth of Your Business: How to Get a Small Business Loan in Australia
If you have everything fall into place and are ready to expand, a business loan can put your game to the next level. If managed correctly, loan financing can help you in growing your business – which you may not be able to do if you just settle with your current finances. The key focus here is being able to implement your business strategies, and the right financing can help you do that.
What are the loan requirements that you need to fulfill as a small business owner?
So what should you prepare before diving right into getting a business loan? Before forging ahead and presenting yourself to a lender, here are just some of the things you need to accomplish:
› Documentation on the amount to loan and use of funds: You’ll need to lay it all out how much you need to loan and what you will use it for. You can also create a proper business plan for this purpose. Do your research to support the numbers you will show to the lender. For example, if you need to renovate your office space or shop, get quotes from the contractor or companies that will supply materials and do the renovation for you. If you need money for equipment, ask suppliers how much it would cost you.
› Identification: Banks or Lenders will have to know who you are, including background research on you. Prepare your ID’s such as driver’s license, passport, or both – as this is the first step in accomplishing business loan requirements.
› Financial Statements: Most lenders would require you to submit your financial statements. This can include Balance Sheet, Income Statement, Cash Flow Statement, and Statement of Retained Earnings. Double check with your lender on which statements you have to bring. You may also be asked to bring documents such as your most recent tax returns and business activity statements.
› Bank Statements: The lender will also want to see your latest business bank account statements. This can be either in hard copy or electronic form. Business savings and credit card statements showing assets and liabilities will also be required when applying for a business loan.
› Proof of Personal Income: You also have to provide your two most recent tax returns and notices of assessment if you are a director or shareholder in a company.
› Credit Report: The lender will review your credit report for them to know your financial standing. If you have late payments, defaults, and judgments, it will be more difficult for you to get a business loan.
› ATO Tax Debt: If you’re in a payment arrangement with the ATO, you are less likely to be approved for a bank loan. Before you enter into a payment arrangement, discuss your ATO debt with potential lenders to know if this is going to lower your chances of getting a business loan.
› Collateral for a Secured Loan: If you want to get a secured loan, you’ll have to check what you can pledge as a form of collateral. This can include residential property, commercial or rural real estate, or business assets.
What are the types of financing sources available for small businesses?
Once you have the basic requirements ready for getting a loan, check out these types of business loans, you may want to consider applying for:
› Traditional Bank Term Loans: A bank term loan requires you to complete a lot of paperwork. Besides the application, you’d have to provide financial statements and a business plan. This is a form of secured loan that requires you to provide a collateral. However, getting approved takes a lot of time, and may even take up to two months. The upside to this is that the interest rate will be lower compared to other types of loans. You’ll have to do regular monthly payment until the loan plus interest is completely paid.
› Business Credit Cards: This is a popular form of small business finance, but the interest rate is usually high. They do offer an interest-free period on charges. For example, if you pay off the loan amount within the 55 days of the charge, you don’t have to pay for any interest. If you’re going to apply for a business credit card, the card provider will require you to submit information such as income, length of time in business, credit report, and credit score to determine your credit-worthiness.
› Business Overdraft: This allows you to run a negative balance on your regular transaction account up to a certain amount. You’ll have to pay the interest on any funds that are overdrawn. Besides the interest to pay, you’ll also be charged with certain fees. You can get business overdrafts in secured or unsecured forms.
› Business Line of Credit: This type of loan allows you to borrow an agreed amount, but it’s okay to only pay for the interest on what you actually use. Take, for example, the bank approving a line of credit for $100,000, but you only use $50,000 from it. You’ll only pay for the interest of the $50,000 you used. You can repay the loan at your own pace and have the flexibility to get money only when you need it. However, if you are going to loan something lower than $50,000, you won’t get this type of credit option.
› Business Equity Loan: This loan will entail you to provide collateral in the form of residential or commercial property. You can borrow up to 100% of the value of a residential property used as security for the loan. A competitive interest rate will also be given. However, your property is at risk if you get into financial trouble and cannot make the repayments.
› Low-doc or no-doc business loan: If you haven’t established any financial statements and proof of income for the past two years, a low-doc loan could be an option. A no-doc loan can be applied for if you don’t have proof of income. Low-doc and no-doc options are backed by residential property. The downside to these kinds of loans is they have higher interest rates. Approval for the loan can vary from a few days to several weeks.
› Invoice Financing: You can work with an invoice finance company to receive funds sooner if you don’t want to wait to receive money from your customer invoices. Once you create an invoice, you can submit it to an invoice company, and they’ll pay you a percentage of the total invoice value. They will also charge an advance fee from the invoice amount. When the customer pays for the amount, you’ll get the money minus fees.
› Unsecured Business Loans: Unsecured loans are perfectly suited for small businesses due to the convenience of getting them. You won’t have to go through a complicated application and lending process. The lender will analyse your finances, which includes bank transactions and other information, to determine how much will be loaned to you. You also don’t need to provide collateral. Unsecured loans can be approved in as quick as 24 – 28 hours, and at times you’ll only need to show bank business statements and financial management statements.
4. Using a Business Loan Calculator – Looking for the Best Lender
As you go over the different loan options you can find online, take note of the interest rates and repayment terms on offer. Use a Business Loan Calculator, which you can find on sites such as Calculator.net, Nerd Wallet, or in various online banking sites to help you foresee how much you need to shell out every month to pay off a loan.
Take, for example Prospa, which is a top online lender in Australia that offers small business loans and line of credit. They make it easier for business owners to get access to finance solutions and make informed business decisions about it. If you want to borrow $2000 – 25,000, you may want to take advantage of their line of credit which gives you ongoing access to funds. If you need somewhere between $5000 – 300,000, a small business loan on agreed interest rates may work for you.
In a Nutshell
It’s not easy to scale up a business, but careful planning, calculated risks, and hard work will pay off in the long run. Remember to have a back-up plan when you get affected by market challenges, and don’t be discouraged by them. Planning will help you win half of the battle, and pushing yourself to achieve your targets will eventually get you where you want to be.
You also don’t have to wait for many months just to save up money to grow your business. There are loan options available which will help you accomplish your goals now and pay for it later.
Among the various types of loans, unsecured business loans are greatly helpful for entrepreneurs because they don’t have to submit a ton of documentation and secure a collateral. Take a look at Bizzloans unsecured loan options which require no collateral and gets you approved in as quickly as 24 hours. For unsecured loans up to $150,000, you’ll only need to show business bank statements. For over $150,000, you are only required to submit simple managerial financial statements.
Russel needed an injection of cash to pay his employees while he was waiting to be paid. We were able to have the funds in his account 48 hours after he first applied.
Max needed funds to renovate his restaurant in NSW. He didn’t want to put his property on the line to secure a loan with the bank. We were able to get him over 100k without offering any security.
Anna needed funds to renovate her practice in Adelaide. We were able to get her the funds she needed with only providing her business bank statements and photo ID.