In this article, we will discuss 10 benefits of refinancing a business loan that can help business owners make an informed decision about whether refinancing is the right choice for their business. From reducing interest rates to increasing cash flow, these 10 considerations can assist in pinpointing which option will work best for a business’s financial situation and long-term growth. 

Whether you are a business owner considering refinancing, are looking for ways to improve cash flow, or are simply curious about the benefits of this financial strategy, this article will provide valuable information and insights. It is important to note that refinancing a business loan is a big decision and it is advisable to consult with a financial advisor or lender before making any decision. Read on to find out how refinancing a business loan could bring many financial advantages into reach.

1. Lower Interest Rate

Refinancing gives you the opportunity to reduce your interest rate, unlocking potential to save heavy amounts of money. Lower payments can be immensely beneficial, enabling you to use a larger chunk of your cash flow for multiple other crucial expenses. Furthermore, reducing the interest rate may also reduce the loan frame; this would mean that you save more money in the long run. If your credit score has improved significantly since you first applied for the loan, then refinancing is highly recommended. The lower interest rate may also make it easier to pay off your debt faster.

2. Improved Credit Rating

When you refinance, it shows that you’re taking an active role in managing your finances and that you’re financially responsible. This can help improve your credit rating, making it easier for you to gain access to additional financing if needed in the future. Many people find that their credit score has improved after they refinance their existing loan. As your credit rating improves, lenders may be more willing to work with you on other loans or lines of credit in the future.

3. Extended Loan Terms

Refinancing a loan can give you the ability to extend its terms, allowing you to pay off what is owed over a longer period of time. This means that each individual payment will be smaller than before but stretched out over a longer time frame.  This could be beneficial for those businesses that need extra time to repay a loan but still want the ability to make progress on paying it off. By extending the terms of the loan, businesses can lower their monthly payments, which can free up cash flow and provide them with more financial flexibility. 

4. Consolidating Debt

If you have multiple loans or debts under different lenders or credit cards, refinancing can give you the option to consolidate all of these debts into one loan with one lender at a single rate of interest, helping simplify repayment and make repaying debt much easier and more manageable than before.  This could potentially save you a significant amount of money in the long run.

5. Accessing Equity

If your business has built up some equity over time from paying down its debt (or from market value increases), then refinancing provides an opportunity for businesses to access this equity without having to take out additional loans or financing products – potentially saving on fees associated with new borrowing products as well as interest rates in general. By using the equity offering to refinance, you could potentially gain access to extra funds without having to take on additional debt.

6. Freeing Up Cash Flow

Refinancing gives businesses the chance to free up their cash flow by reducing their monthly payments due on their existing loans. This leaves more capital available for reinvestment back into operations and growth opportunities as opposed to remaining tied up in debt service payments each month – helping accelerate overall growth potential in most cases.  Lower payments can also help reduce stress associated with loan payments, enabling businesses to focus more on their core operations and strategic objectives. Refinancing can be a great way to free up resources for other purposes, enabling businesses to pursue new investments and grow in the process.

7. Tax Deduction Advantages

Many types of interest incurred on business loans are tax deductible – meaning that when businesses refinance they may be able to take advantage of deductions based on the amount they’re paying towards their new loan versus what they paid towards their old one; potentially providing greater savings long-term. It is important to speak with an accountant or tax advisor to ensure that you understand the full tax implications of refinancing before proceeding.

8. Flexibility & Leverage Opportunities

By opting for a variable-rate loan structure when refinancing, businesses may find themselves in a better position if interest rates drop again; giving them even further leverage when negotiating terms with lenders and potentially even going after reduced rates. Additionally, businesses may find themselves gaining access to more flexible repayment options when refinancing which could prove beneficial depending on specific operational needs at any given point in time (i.e., seasonal slowdowns, etc).  

9 . Opportunity To Improve Loan Structure & Terms

Because banks tend to offer more competitive terms when lending large sums that are spread out over extended periods, borrowers may find themselves with more favourable repayment options following a successful refinancing process including extenuated payment periods as well as varied interest structures. This can give businesses an opportunity to tailor their loan repayment structure in order to best suit their current operational and financial needs.

10 . Outsourcing Negotiations Can Help Simplify The Process

Refinancing is no easy task; however there are third party services available now that specialise in helping facilitate such processes and negotiate favourable terms between lenders and borrowers alike – meaning less hassle and worry for those seeking such financial solutions. Working with an experienced professional can help make the entire refinancing process easier and less time consuming – potentially freeing up resources to focus on other aspects of business operations instead.

Carefully consider the many advantages and disadvantages of refinancing before making a decision for your business – it may not be the best choice in every situation. If you decide that refinancing is right for your company, compare offers from multiple lenders to get the best deal and ensure that you understand all of the terms and conditions involved. With careful planning and execution, refinancing can be a great way to improve your business’s financial position.

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The post 10 Benefits Of Refinancing A Business Loan first appeared on Bizzloans Australia.

What you need to know about business loans

Before you apply for a business loan, there are some important things to know. First, it’s important to understand the types available and which one is best for your situation. Business loans come in two main types: secured and unsecured. Secured loans require collateral, like real estate or equipment, while unsecured loans are based solely on your credit history and ability to pay back the loan.

When it comes to faster loans, the amount you can borrow will depend on several factors such as your credit score, income, and business plan. You’ll also want to make sure that you understand the terms before signing any documents or agreeing to any payment plans.

The different types of business loans available 

There are several different types of business finance available. These include merchant cash advances, equipment financing, and lines of credit. Each type has its own advantages and disadvantages depending on your situation, so it’s important to do the research and choose the right type for your needs.

Merchant cash advances are great if you need a faster loan and don’t have a lot of collateral to offer. These loans are based on your business’s credit card sales, so you can get the cash you need quickly without putting up any collateral.

Equipment financing is another option for faster business loans. This type gives you the money you need to buy equipment or other large purchases for your business. This is a great option if you need the funds quickly and don’t have any collateral to offer.

Finally, lines of credit are a more traditional form of business loans. With this type of financing, you can borrow up to a certain amount and then repay it over time as you make sales or receive income from other sources. This can be a great option if you need money quickly and are able to manage your payments over time.

How to get a business loan in 24 hours or less 

Check your credit score and make sure it’s in good shape

Most business loans require a good credit score, so make sure yours is up to par before applying. You can check your credit score for free on any of the major credit bureaus websites. If you don’t have a good credit score, there are also faster loan options that don’t require one.

Gather your business documents, including your business plan and financial statements

You’ll need to provide documentation such as your business plan, financial statements, and other documents to prove that you’re a reliable borrower. Make sure you have these on hand before applying for the loan.

Research different lenders and compare interest rates

Do your research and compare business loan options to find the one that best suits your needs. Make sure you know the interest rates, repayment terms, and other fees associated with each lender before making a decision.

Complete the online application form and wait for a response

Once you’ve chosen a faster loan option, it’s time to complete the online application form. The process is usually straightforward and simple, but it may take a while for your application to be approved.

Be prepared to provide additional documents if requested. In some cases, lenders may request additional documentation before approving your business loan. Make sure you have all the necessary documents ready and be prepared to provide them if requested.

If you’re approved, sign the loan agreement and receive the funds

Once your business loan is approved, all you need to do is sign the agreement and wait for the funds to be transferred. Make sure you read through the terms and conditions before signing.

Keep up with your business loan payments. It’s important to keep up with your payments so you don’t get into any financial trouble. Make sure you plan ahead and budget for your loan payments so that you don’t fall behind.

Use the money to grow your business and create jobs!

Now that you have the loan, it’s time to put the funds to work! Use the money to invest in new equipment and technologies, hire more employees or expand your business. The additional finance can help you achieve your business goals faster and create more jobs for people in your community.

Things to keep in mind when applying for a business loan 

Getting a business loan in 24 hours or less is possible, but it’s important to prepare before you apply. Make sure that you have all the necessary documents and information ready, including bank statements, tax returns, proof of income, and a detailed business plan. You’ll also want to make sure that your credit score is good enough to qualify for the loan.

Once you’ve prepared all of your documents, you can start shopping around for business loans. Work with a lender that has experience in offering different types of business finance and that understands your needs. Make sure to compare interest rates and other terms before signing any documents or agreeing to any payment plans. Finally, make sure to read all the fine print and understand the terms of the loan before signing anything.

Getting a business finance can be a great way to get the capital you need quickly without having to wait weeks or months for approval. Just make sure that you do your research and choose a lender that will provide you with the best terms and interest rate possible.

Tips for making your business loan application stand out 

When applying for business finance, it’s important to make sure your application stands out from the competition. Start by making sure all of your paperwork is accurate and up-to-date. You should also highlight any special qualifications or attributes that you have that could help you secure the loan faster. Additionally, try to provide as much detail as possible in your business plan so the lender has a clear understanding of how you plan to use the money. Finally, be sure to explain why it’s important for you to get the loan and how it will help you achieve your goals faster.

Applying for a business loan doesn’t have to be a long and difficult process. With the right preparation, you can get a business loan in 24 hours or less. Keep in mind the different types available and choose the one that best suits your needs. When applying for one, make sure to include all the required documentation and be clear about why you need the loan and how you plan on using it. By following these tips, you can ensure that your application will stand out from the rest. Have you ever applied for a business loan? What tips would you add to this list?

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The post How to Get a Business Loan in 24 Hours or Less first appeared on Bizzloans Australia.

Take a step back and assess your business as it is today

What aspects of your business plan are no longer viable? In what ways can you adjust it to better fit the current market and customer needs? Ask yourself questions such as:

– Is my product still relevant in today’s economy?

– Are my pricing strategies competitive with other similar businesses?

– Have I identified new target markets or customer segments to expand into?

– Have I taken advantage of the latest technologies and trends?

– Are my marketing strategies up to date with current trends?

Evaluate what has and hasn’t been working over the past few years

Take a look at the successes and failures of past projects, initiatives, and campaigns. What worked? What didn’t? Identify areas that need more attention or could use improvement. Pay close attention to any changes in customer needs, competitor offerings, technological developments, and industry trends—these can all have an impact on your business plan.

Brainstorm new ideas and strategies for reviving your business plan

Now that you’ve assessed the current state of your business, it’s time to brainstorm some strategies for reviving your outdated business plan. Think about different ways you can use technology, marketing tactics, or other resources to stay competitive.

Draft a new business plan that focuses on your strengths and areas of improvement

Once you’ve identified potential strategies for reviving your business plan, it’s time to create a new one. Make sure that the plan takes into account any changes in customer needs, industry trends, and technological developments.

When drafting your new business plan, evaluate your strengths and weaknesses. Identify what you do well and what areas need improvement or adjustment. Think about how you can use these to create a competitive advantage for your business.

Implement your new business plan and measure its success. Monitor the results of your strategies and make adjustments as needed. Keep in mind that a successful plan requires consistency, dedication, and patience.

Create achievable goals for the next five years

When reviving your business plan, it’s important to set realistic and achievable goals for the next five years. Consider what areas of your business need improvement or development, then determine how you can get there in a reasonable amount of time. Additionally, look at current economic conditions and industry trends to better anticipate what may be needed for success in the future. For example, if the industry is shifting to become more digitally focused, then you may need to create a digital strategy for your business in order to remain competitive. Set goals that are specific, measurable, attainable, relevant and timely (SMART) in order to make sure your five-year plan is successful. By setting SMART goals now, you will be better prepared to take your business to the next level in the coming years.

Additionally, it’s important to set regular milestones and review points so that you can track your progress over time. This allows you to adjust your goals as needed if changes arise unexpectedly, or to celebrate successes along the way. Knowing what needs to be accomplished and when will help you to stay focused and motivated, while also ensuring that your five-year plan is successful.

Implement changes slowly so you can track progress accurately

You should always make changes to your business plan slowly and track progress accurately in order for you can tell which strategies are working. Additionally, it will give the opportunity adjust or refine new plans as needed-a process that’s essential when creating any type of document. As time progresses, you’ll be able to grow your business more efficiently and effectively.

When making changes in your business plan, it’s important to consider the potential impact on other areas of your business. For example, if you decide to expand into a new market or increase spending in certain areas, how will that affect customer service, employee morale, or other factors. Evaluating these areas can help you make sure that the new plan won’t cause unintended consequences.

Finally, once your plan is in place and you’ve made all the necessary changes, it’s important to review and update it regularly. This will help you stay on top of any changes to the market, trends in your industry, or other external factors that can affect your business. By revisiting and revising your plan on a regular basis, you can ensure that it will stay effective in the long run.

Celebrate your successes along the way!

Reviving your business plan can be a daunting task, so don’t forget to reward yourself and celebrate successes along the way. This will help keep you motivated and inspired to keep pushing forward. Make sure you take a moment to recognize the progress you’ve made and pat yourself on the back. You may even find it helpful to create a timeline, so you can track your progress and have a visual reminder of how far you’ve come. Celebrating successes can be as simple as taking yourself out for a coffee or treating yourself to a nice dinner. Whatever works best for you, make sure you take some time to enjoy the small victories as you work towards your ultimate goal.

With the right approach and dedication, reviving your outdated business plan in 2023 can be an exciting opportunity for growth. By following the strategies outlined in this blog post, you can ensure that your business plan remains relevant and competitive for years to come.

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The post How to Revive Your Business Plan in 2023 first appeared on Bizzloans Australia.

To help you find the best small business loan for your needs, we’ve compiled a list of the 10 best small business lenders. We considered factors such as loan amounts, repayment terms, fees, and customer reviews when creating this list.

Prospa is Australia’s leading small business lender, providing fast and easy access to finance for businesses of all sizes. They offer business loans and lines of credit up to $500,000, with no hidden fees or charges. Their simple online application takes just minutes to complete, and they can have you approved in as little as 24 hours. So if you’re looking for fast, easy financing for your business, Prospa is the right choice.

Max Funding is Australia’s fastest and simplest business loan process. They work to provide small business owners with the finance they need, when they need it. With a focus on speed and simplicity, they make it easy for business owners to get the money they need – without all the hassle. Apply now and get funded in as little as 24 hours.

Lumi is a small business lender that’s shaking up the industry with its innovative products and customer-centric approach. With a team of experienced lenders, Lumi is committed to helping Australian businesses grow and succeed. They offer fast, simple, and flexible financing options that are designed to meet the unique needs of small businesses. So if you’re looking for a trusted partner who understands your business, look no further than Lumi.

Capify is Australia’s first alternative and accessible unsecured small business lender. With over 13 years experience, they understand the highs and lows of running a small business.

They are passionate about helping small business owners achieve their goals, so they can get back to the things they enjoy in life. Capify offers a range of lending products that are flexible and adaptive, so you can get the funding you need when you need it most.

OnDeck is the perfect solution for small businesses who need unsecured business loans. With a quick and easy application process, you can get the funding you need in just 24 hours or less. Plus, OnDeck offers free business credit score checks so you can understand your credit rating and make the most of your loan. With over 10 years of experience, OnDeck is a huge international lending company that has partnered with some of the biggest names in finance.

Since its inception in 2019, Bizcap has been committed to supporting Australian SMEs with the capital they need to grow their businesses. With over 15 years of underwriting experience in the US market, Bizcap offers a unique value proposition that sets it apart from other lenders in Australia.

Bizcap is focused on supporting businesses that may have been declined by other lenders or have a poor credit profile. Its management team has a wealth of experience and is dedicated to providing simple, efficient, and effective financing solutions for Australian SMEs.

Since 2007, Trucap has been providing cash for businesses to grow and expand. They are a trusted partner of businesses across Australia, and their success is directly tied to the success of our clients.

TRUCAP business loans offer an alternative to traditional bank loans. Their loans are fast, flexible and tailored to your unique needs. Unlike traditional bank loans, they don’t require a strong credit history or collateral. They also understand that businesses need flexibility when it comes to repayment, so they offer a range of options to choose from.

Shift is a lending company that provides business loans and lending solutions to small and medium sized businesses in Australia. Their options are all tailored to SMEs, and their business overdraft facility is unique in the Australian market. With more than 20 years of experience in banking, Shift’s CEO Jamie Osborn founded the company back in 2013 and has since grown it to be a large player in the online lending industry.

At Earlypay, they make business finance simple. They provide fast and easy access to the capital your business needs to grow. With Earlypay, you can get the money you need without having to go through a long and complicated application process. They offer flexible financing options that are tailored to your unique needs. So whether you need money to expand your operations or cover unexpected expenses, Earlypay can help.

FlexiCommercial is the leading finance specialist for business equipment and software. They work with brokers to provide tailored financing solutions for their customers, no matter how unique the proposition may be. With over two decades of experience in the industry, they are experts in what they do – so you can rest assured that your transactions will be handled with professionalism and care.

• Vehicle loan up to $250,000
• 24 months minimum time in business required

We hope this list of the 10 best small business lenders helps you find the right fit for your small business loan needs. Remember to consider factors such as loan amounts, repayment terms, fees, and customer reviews when comparing lenders. With so many options available, taking the time to research your options can save you both time and money in the long run.

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The post Quick Loans: 10 Best Small Business Lenders first appeared on Bizzloans Australia.

What is a supply chain disruption and why do they occur?

A supply chain disruption is any event that prevents or delays the flow of goods and materials throughout the supply chain. Disruptions can occur at any stage of the supply chain, from production to delivery, and can be caused by a variety of factors, including weather, accidents, political instability, and natural disasters.

While disruptions are often out of our control, there are some steps that small businesses can take to minimize the impact of a supply chain disruption.

How can you identify if your business has been impacted by a supply chain disruption?

There are a few signs that may indicate your business has been impacted by a supply chain disruption:

• You receive fewer orders than usual
• Orders are delayed
• Inventory levels are low
• You receive damaged goods
• Customers are complaining

If you notice any of these signs, it’s important to take action right away. The sooner you can identify the problem, the easier it will be to fix.

What are some steps you can take to mitigate the effects of a supply chain disruption

1. Try to anticipate disruptions before they happen.

This can be difficult, but it is important to do your best. Look at your supply chain and identify any potential points of failure. These are the places where a disruption is most likely to occur. For each potential point of failure, brainstorm some possible solutions. For example, if you rely on a single supplier for a critical part, what would happen if that supplier went out of business? Could you find another supplier? Would you be able to make the part yourself?

Disruptions can come from many different sources, so it is important to be as prepared as possible. By identifying potential points of failure and brainstorming solutions, you can be ready for anything that comes your way.

2. Put together a plan for how you will respond to a disruption when it does occur.

This plan should include who will be responsible for each task, how you will communicate with your employees and customers, and what steps you will take to minimize the impact of the disruption.

When business is disrupted, it can be difficult to know what to do next. However, having a plan in place will help you to stay organized and focused on your goals. Here are some tips for creating a disruption plan:

Assign roles and responsibilities.

When business is disrupted, it is important to have a clear plan for who will be responsible for what tasks. This will help to ensure that everyone knows their role and can work together to minimize the impact of the disruption. Train your employees on what to do in case of a disruption and make sure that they understand the importance of following the plan.

Communicate with your employees and customers.

It is important to keep your employees and customers informed during a business disruption. Use clear and concise communication to let them know what is happening and how it will affect them. Be sure to communicate early and often. Use multiple channels of communication, such as email, text, social media, and your website. Keep your messages updated as the situation changes.

If you have employees who work remotely, make sure they have the information they need to stay productive. If possible, provide them with alternate work locations or arrangements.

Finally, remember to communicate with your suppliers and other business partners. Keep them updated on the status of your operations and any changes that may affect them. This will help mitigate the effects of a supply chain disruption. Effective communication is essential during a business disruption.

Take steps to minimize the impact of the disruption.

There are several steps you can take to reduce the impact of a business disruption. For example, you may need to temporarily close your business or change your hours of operation. You should also have a plan for how you will maintain customer service during the disruption.

Creating a business disruption plan can help to minimize the impact of an unexpected event. By having a plan in place, you can keep your business running smoothly and ensure that your employees and customers are taken care of.

3. Review your plan regularly and make changes as needed.

This will help ensure that you are prepared for any future disruptions that may occur. Disruptions can happen at any time, so it is important to be prepared. Reviewing and updating your plan regularly will also help you to identify any potential weaknesses in your supply chain so that you can address them before they cause problems. By preparing for the unexpected, you can keep your business running smoothly, no matter what.

4. Be flexible and adaptable.

The best-laid plans often go awry, so it is important to be flexible and adaptable when disruptions occur. For example, you may need to change your suppliers or find new sources of inventory. You may also need to adjust your prices or offer different products and services. Disruptions can be frustrating, but by being flexible and adaptable, you can minimize the impact of supply chain disruptions on your small business

How can you get back to business as usual after a disruptive event?

The first step is to assess the damage. This includes looking at how your supply chain was disrupted and what the impact was on your business. Once you have a clear understanding of the situation, you can start to develop a plan for getting back to business as usual.

This plan should include steps such as identifying alternative suppliers, developing new processes, and implementing new technology. It is also important to create a communication plan so that you can keep your customers and employees up-to-date on the latest information.

As a business owner, you know that your company’s success depends on many factors – including the strength of your supply chain. Disruptions to your supply chain can have a major impact on your business, so it’s important to be prepared.

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The post How to Manage Supply Chain Disruptions for Small Businesses first appeared on Bizzloans Australia.

This is where equipment financing comes in. Luckily, small businesses need not worry because especially in Australia, a lot of equipment financing options are readily available to help out any small business in need of help when it comes to purchasing the equipment they need to start or to grow the business.

Like a lot of business loans, any equipment financing option that a business is looking to apply for needs proper consideration. Depending on just how much the business needs, the business can face different fees like taxes and other additional costs.

A business should be aware of the costing factors that it needs to consider in order to successfully choose a business equipment financing that is fit for the needs of the business. A business should also start to think about partnering up with a financier that can offer a variety and a range of business equipment financing options that would enable it to reach out to a lot of new customers and secure its everyday business transactions better.

WHAT IS EQUIPMENT FINANCING FOR SMALL BUSINESS?

An equipment financing option is a business loan that is applied for the use of purchasing or leasing a piece of equipment or machinery for the business to help in its everyday operations.

For most small businesses, purchasing a new equipment either in lieu of the old one or a totally new one can be quite expensive, especially if counting the already running everyday cost of running the business. An equipment financing option for small business ensures that they have the means to purchase or rent out any equipment they would need and also ensures that they do not overspend on equipment or machinery that they would only need during one or two seasons.

Equipment financing exists and is relevant to almost every business industry. From small businesses that manufacture products that require machineries to your small local cafés that are actually leasing their espresso and coffee machines, equipment financing is there, adjusting to whatever industry any small business is in.

DIFFERENT TYPES OF BUSINESS EQUIPMENT FINANCING

‍There are a lot of options for business equipment financing for small business that will allow them to secure the equipment or machinery that they would need for their daily operations, these options include the following:

HIRE PURCHASE EQUIPMENT FINANCING OPTION

This type of business equipment financing option means that a business agrees to a hire purchase agreement where it will make regular repayments to a financial institution over an already agreed fixed period of time. Upon reaching the end of that period of time the equipment or machinery leased would officially become the business’ property.

A hire purchase equipment appears on a business’ balance sheet as a liability, however it becomes an asset once owned. But the machine or equipment itself is already considered owned by the business.

At the end of the leasing period, there is a possibility that a residual value would be required if the balance is not paid in its entirety and the interest for the hire purchase has accrued.

OPERATING LEASE EQUIPMENT FINANCING OPTION

Through this type of equipment financing option, a business will not require the need for the equipment in the entirety of its useful life. This means that the equipment or machinery leased would only be for several years or a period of time that is already agreed upon by the parties.

The business is able to lease the piece of equipment or machinery for that certain amount of time and is returned to the lessor when the contract ends or at the end of the period.

In this type of equipment financing option, the lessor remains as the owner of the equipment or machinery leased and is the person responsible for the cost of maintenance of the said equipment or machinery during the lease period. An operating lease equipment financing option can be equated to a general rental agreement.

FINANCIAL LEASING OPTION

This type of equipment financing option is similar to the others as it has a loan period. The difference in this type of option is that at the end of that loan period, the small business has the choice of purchasing the equipment or machinery loaned from the lessor should the lessor give the small business an offer to purchase the said equipment or machinery.

SMALL BUSINESS LOANS FOR EQUIPMENT

‍Small businesses also have the option to secure a small business loan that is meant for purchasing equipment or machinery. This is usually the case for small businesses that do not have the revenue yet to secure a purchase or apply for a lease equipment financing option.

There are various small business loans that are available in Australia today and most offer options that are catered to a small business looking for funds for equipment in order to actually start being operational. Small businesses have the option to finance long and short term loans for their equipment or machinery purchases. The business should also consider that when choosing the structure of the loan that they are applying for, they should also consider to match the perceived cash flow with that of the lifespan of the equipment or the machinery the business is looking to purchase.

Businesses should avoid taking out a ten-year equipment loan for an equipment that is only operational for about five years.

PROS AND CONS OF BUSINESS EQUIPMENT FINANCING OPTIONS

There are several pros and cons to taking out an equipment financing option for a small business, to weigh in on your decision, here are some of them:

PROS

1. No large one-time cost

A business, instead of worrying about a huge amount of funds in order to purchase equipment or machinery, can instead plan and manage repayment schedules that are distributed over a period of time. Small businesses are especially vulnerable to large costs that are one time in payment, this means that small businesses may be able to work out if the payments are staggered and distributed among a certain period of time.

2. The business will get to own the equipment or machinery

In most equipment financing options, at the end of the loan term and after the repayments are completely made, the business itself will be able to own the equipment or machine. This would mean that the business would be able to sell or even lease out the equipment once it has fully paid for it and the leasing term is done.

3. A Business equipment financing option does not require any collateral

For most businesses, this is a deal breaker. Small businesses in particular may not have enough assets that they can use as collateral. Except for small business loans however, most business equipment financing options do not need to have any form of security or collateral when applying for it.

This is a big deal when it comes to small businesses as they usually do not initially have other assets to use as collateral.

4. Businesses will only pay for what they actually use

A deal breaker for small businesses when it comes to funding options, be it a small business loan or a business equipment financing option, is that if there is little to no extra cost at all, then it would be good for the business. This is one pro that a small business should keep in mind about a business equipment financing option, that it will only pay for what it actually uses, with minimal additional costs or fees.

CONS

1. Equipment becoming obsolete

In today’s age and technology, equipment and machineries are often instantly updated, sometimes making the past current equipment or machinery totally obsolete. One con with an equipment financing option is that if an equipment or machinery becomes obsolete, the business can possibly still be making repayments on the equipment financing option even if the equipment or machine is no longer usable.

2. Equipment depreciates

Equipment and machinery swiftly depreciate throughout its lifetime. Several factors can affect its depreciation, from its regular use, to the advancement of technology, and to other factors that may help swiftly depreciate the equipment like damage to it.

This would mean several things for the small business: it may not be able to deduct the full amount or value of the equipment or machine on the following year’s tax returns, and will continuously be depreciating per year. Another is that if the business chooses to rent out or even sell the equipment or machine, there is a possibility that the amount they paid for it would not be the same amount that they can sell it for.

3. It is more expensive in the long run

Renting out equipment, even if at the end of the loan term the business gets to own it, is a lot more expensive than simply paying a hefty amount of money and purchasing it there and then. This con is particularly connected to the pro reason that a business can pay in staggered amounts. What the business needs to decide is that if it is worth it paying more over; no longer needing to worry about looking for a big amount for a one-time cash out.

4. Giving the equipment back after loan term expires

Not every business equipment financing option has the funding plan where after the loan term expires and everything is paid for, will the business own the equipment. For some business equipment financing option plan, the equipment or machinery will be returned to the lessor after the term expires, which basically means that the business who was renting out the equipment would either need to renew in order to keep the equipment or machinery, or totally find a new business equipment financing option to apply for.

A small business should be able to weigh out the pros and cons of applying for a business equipment financing option. They should be able to decide on whether or not the pros measure out the cons when it comes to the needs of the business.

And while a small business should weight out both the pros and cons, it should also be able to ask itself these questions to help it out in its decision making:

QUESTIONS A SMALL BUSINESS SHOULD ANSWER WHEN CONSIDERING AN EQUIPMENT FINANCING OPTION:

• How much capital does the business need?
• For how long does the business need the equipment?
• Is the machinery or technology swift in having changes made to it in the industry it is in?
• What is the direct effect of the equipment or machinery to the business?
• Can the business lease to own or would it be a lease and return plan?

IS YOUR BUSINESS READY TO TAKE OUT AN EQUIPMENT FINANCING OPTION?

When it comes to financing, any small business must take its careful time with planning and forecasting its cash flow, no matter how it may seem as if the business is currently strong with its current cash flow, there still needs to be proper planning when it comes to getting an equipment financing option.

By managing and forecasting the business’ cash flow, this helps the business in figuring out and choosing the proper equipment financing structure that best fits it. The business would also get a feel of whether or not the business actually benefits from the financing plan.

Equipment financing options in Australia enables small businesses to take advantage of the funds to purchase equipment and opens up the possibility of catering a lot more projects and customers, effectively scaling up the business. With proper and correct planning and the right equipment financing structure, this is the best way to grow one’s business.

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WHAT IS A BUSINESS OVERDRAFT?

A business overdraft is similar to that of a personal overdraft on someone’s personal account: there is a line of credit or a fixed amount of extra funds that are attached to the said business account which the business can access whenever the business needs to.

The general rule with payment is that if the amount used by the business stays within the approved time limit, then the business pays back what they can, when they can, although interest accumulates on the balance of the overdraft until the overdraft amount used is fully repaid.

While the interest accumulates and is only triggered when the business actually enters the overdraft funding, the interest itself will only be on the amount the business actually spends.

For businesses looking to borrow on a short-term basis, this would mean that the total cost may be lower than that of an equivalent loan. This would make the business owners who are mindful of the costs that are included in other types of business loans. It is the lender, the bank or a financial institution, to decide how much interest there is in a business overdraft, thus there are varying interest rates depending on the lender.

TYPES OF BUSINESS OVERDRAFTS

There are usually two types of overdraft for businesses: Formal Overdrafts and Informal Overdrafts.

Formal Overdrafts

These are overdrafts that are agreed with the bank or the financial institution in advance, or before usage of the business overdraft. With this comes a limit of the amount that the business is allowed to borrow, and an agreed rate for the interest.

Informal Overdrafts

An informal overdraft is easily described as that cost that a bank or a financial institution if a business spends beyond the means that their account has with no formal business overdraft that is in place or agreed upon prior to the business beginning to use the credit line.

An informal business overdraft usually costs a lot higher, having no formal agreement with the bank or financial institution, it also means that the payment deadline is shorter than that of a formal overdraft.

WHY WOULD A BUSINESS CHOOSE A BUSINESS OVERDRAFT?

A business overdraft is a form of business loan that acts as a safety net for business. Be it any business, this form of financing is useful in a sense that any industry the business may be in, everything can swiftly change overnight. A lot of things out of the businesses’ control may happen and impact the business and its cash flow directly.

By having a business overdraft, the business has an additional amount of funds or money that they can use when their own funds or accounts run out of money. This can help a lot of businesses bridge the gap between the now and the next set of income that the business is sure to receive.

A business would most likely choose to have a business overdraft over regular business loans because of its flexibility. The line of credit that the business can use can be used to purchase anything, pay for anything or basically where the business needs to use the funds for, without having to be tied down to a certain particular item or transaction to use it on.

Having an overdraft, the business is allowed to repay the funds within their own time, for as long as it is within the approved time limit. This would mean a lot to many businesses who struggle in following their scheduled payments, and while this may seem trivial, to businesses, this is a big help in being able to better take control of their cash flow and funds.

Business owners who are keen on interest rates will be happy to know that the interest rates that their business will pay for is only up to the extent of the overdraft amount that they use. This means a great deal of help to a lot of businesses who are looking for lesser interest rates when it comes to business loans.

An unsecured business overdraft is also one of the fastest application and approval choices should a business look for business loans that are both unsecured and have the fastest approval time and rates anywhere.

Security is the main key point in having a business overdraft and a business would want this type of financing for this very reason. It offers any business a sense of security in the sense that it would always have a safety net to rely on, for as long as it is there, the business would need not worry about looking for funds that it could use should there be a dull time where little to no cash flow comes into the business.

This form of financing has a relatively low cost compared to other business loans that are available in the loan markets today. This is true, most especially because the business will only pay interest for the amount that they use from the business overdraft.

WHAT SHOULD A BUSINESS CONSIDER WHEN IT COMES TO A BUSINESS OVERDRAFT

Businesses should be able to take note of two things when it comes to a business overdraft:

1. The fees that come with it – generally, this form of financing has one of the lowest fees available in the business loan market, however the business should still look into the fees that the bank or the financial institution has when applying for it.
2. The banks or financial institutions can terminate the agreement – the banks or the financial institutions have complete control over the business overdraft, so should they choose to adapt to a newer set of policies, they can choose to terminate it with short notice. Not to worry though, they would usually give options to change into a new agreement with their new existing policy.

BUSINESS OVERDRAFT: SECURED and UNSECURED

A business overdraft, like many other business loans can both be secured or unsecured.

SECURED BUSINESS OVERDRAFT

A secured business overdraft is equal to a formal overdraft for the reason that it is a planned or agreed upon transaction between the business and the bank or the financial institution. Usually, a secured business loan would mean that the business offers an asset as security to the bank or the financial institution.

This allows a business freedom to ask for how much funds they need their overdrafts to have, this is because a bank has a security for the loan or credit amount and has a hold on the business should they forfeit their payments.

UNSECURED BUSINESS OVERDRAFT

This can both be a formal or an informal business overdraft. How can this be? This is because some banks and financial institutions allow businesses to apply for funding without the need for a security for the loan amount. What this entails for the business is a higher interest rate and limited funds that are available to be borrowed.

An unsecured business overdraft may be less viable than that of a secured one, however some businesses would opt for an unsecured overdraft for the main reason that they do not have assets available to be used as security or collateral for the business loan.

Like mentioned above, an unsecured business overdraft has one of the fastest approval times amongst all of the unsecured business loans available. Customers would usually ask for this type of financing through banks or other financial institutions where they already have an account, which means every bank or financial institution that would offer an unsecured overdraft would already have the details of the borrower as they are already their client. This is one of the main reasons why it has quick approval times even if it is part of an unsecured business loan.

WHAT ARE THE BENEFITS OF A BUSINESS OVERDRAFT FOR A BUSINESS

There are various benefits of having a business overdraft for a business, and several reasons were already mentioned, however for the sake of compiling them all together, here are their main benefits:

The business would have fast access to extra funds that it can use for expenses.

As stated above, an unsecured business overdraft has one of the fastest approval times amongst all of the unsecured business loans. While this stands true, imagine how fast a secured overdraft would also be.

Due to the fact that a business is already an existing client of the bank or the financial institution, the usual checking of credit scores is a lot faster as the banks or other financial institutions only need to check their client’s database for the information that they would need to approve of the business overdraft.

The business would be able to expand itself by using these extra funds to cater to larger volumes of jobs and customers.

Because the funds are not tied to a certain use, having a business overdraft could mean that the business could use the funds for larger jobs and to cater to a much larger audience. The business could expand its reach alone just by using the overdraft funds.

An unsecured business overdraft would usually range from 5,000 AUD up to 250,000 AUD, and this is only an unsecured business overdraft. This means that for businesses who have extra assets to spare and to use as collateral, they may be able to dictate a much higher amount although it would still depend on the bank or the financial institutions that offer it.

The business will be able to use their overdraft funds for better negotiating terms, conditions, and even discounts with its suppliers.

In business, it is important to haggle, and yes, from small businesses to even corporations, haggling exists, albeit in a much more sophisticated term: “negotiating.” It is important for business to have funds upfront to use as “ammo” for whenever it tries to negotiate a better term, condition, or asking for a discount from its suppliers.

These various terms, conditions, and discounts all vary, but they are similar in some elements, like for example: the larger the payment upfront is, the lesser the supplier’s hold on these terms, conditions, and discounts. The supplier can become complacent and meet the business halfway, or better yet, actually agree to what a business would like to get from them.

The business has access to quick and easy funds that it can use to pay for expenses while the business itself is waiting to receive payments from customers.

A similar occurrence for a lot of businesses would be that they are unable to pay for expenses or bills that they have as they wait for customers to pay them. Businesses that usually transact are one of these businesses that often find themselves in this situation. With a business overdraft, their worries of having no cash flow yet from their invoices would be long gone as the business can use the funds it can get in order to pay for its bills and expenses that crop up while waiting for payments from customers.

The business is assured a safety net for their funds.

This is worth mentioning again from earlier. A business overdraft would form a sort of safety net for businesses as businesses would find that they would no longer need to worry when their funds are depleted as the business continues on its everyday operation.

Any business would appreciate a safety net to rely on especially when it comes to their funds, a business overdraft, secured or unsecured, formal or informal, gives just that. The sense of security here is key, as businesses, no matter how well prepared they are or how much they are able to double check their funding and expenses, may experience sudden changes brought about by the global economy. It is always better to be secured and ready than to not be at all.

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Just what is a Merchant Cash Advance? A Merchant Cash Advance is an alternative of a business loan or a business financial plan. Usually, small businesses that are in need of funds but do not have any available assets that they can use as security to secure a business loan or funds.

When a business gets a merchant cash advance, the security would come from future sales that are done through the business’ card payment terminal. The repayment amount goes directly to the lender and does not enter the bank account of the business itself. And because future transactions, sales, or payments will act as a security, a business does not need to secure any collateral as a requirement for this type of business financing.

MERCHANT CASH ADVANCE: HOW TO GET ONE

Getting a Merchant Cash Advance is actually quite simple. A lot of providers can give a business various deals with different options and conditions. What is needed is a card terminal machine which will help the third party process payments that will help process the transactions of the business.

If and when a business gets a merchant cash advance, the financer or the lender will be the one working with the card terminal provider for the lender to be able to surmise and understand the business’ current finances. The business’ monthly cash flow and sales are included in this transaction, and if the business has enough cash flow and revenue that are transacted through the card terminal, then it is highly likely that the merchant cash advance will be approved and the business will be given an advance that is usually the usual maximum amount of the business’ average sales.

ADVANTAGES OF GETTING A MERCHANT CASH ADVANCE TO A BUSINESS

There are several reasons why a business chooses to apply for a Merchant Cash Advance, but generally, what are the advantages of actually getting one, besides the additional capital benefit of course. Here are a few advantages for businesses:

The business gets fast access to additional funds

The key point here is the easy and quick access of a business to additional funds for its use. When a business applies for a merchant cash advance, the business will be able to access funds faster than usual. This is because Merchant Cash Advance fenders act quickly, being able to contact the company or provider of the card terminal machine, be able to get the information that they need, approve the cash advance and immediately provide the funds that the business applied for.

And because the decision for the approval comes from the information solely, the business would no longer need to spend a generous amount of time to gather and consolidate requirements they would be required of in other similar small business loans.

Easy Payment Plans

Businesses will no longer have to worry or think about when their payment is due as the payments are automatically deducted and taken from the card terminal automatically. The borrowing business basically pays a percentage of their own revenue from the sales they get from card transactions, this means there is no cash flow issue when it comes to a business’ everyday workflow.

Since the borrower is paying a percentage of revenue from card sales, it doesn’t create cash flow issues. When sales are high, more money is paid back to the lender. When sales are slow, the borrower automatically makes a smaller payment, so it won’t cause cash flow problems.

Flexibility and Ease of the use of the funds

Business loans when applied for usually are already for a certain use of the business. This means that when getting approved for a business loan, a business may only be able to use the loaned amount for the purpose it was applied for. And most of the time banks and financial institutions double check with the business about the status of the loan.

With a merchant cash advance a business has the freedom to use the amount of money that they get with a merchant cash advance loan. This means that whatever the business thinks would be the best fit to use the funds that they received, they are free to do so.

Easy to qualify for

One of the main reasons why a merchant cash advance is preferred is that it is actually easy to qualify for. This is because there are limited checks on a business credit score and the requirements for its financial history may be inexistent. For small amounts the minimum requirements are even waived.

What the lender here takes a look at when it comes to requirements is the business’ main income in order to check and determine if the amounts funded can be repaid by the business.

A Merchant Cash Advance is unsecured

Another unique advantage of a merchant cash advance is that it is an unsecured loan. Most loans will require collateral in the form of assets of the business in order to secure the amount the business is asking for.

In a Merchant Cash Advance, the amount loaned is actually secured by the future card transactions that the business will have, this being the main reason why collateral is not a requirement.

There is transparency from the start

With a Merchant Cash Advance, the transparency is there from the very start. There are no hidden fees and the cost of the loan is given and set by the lender from the very start.

DISADVANTAGES OF GETTING A MERCHANT CASH ADVANCE TO A BUSINESS

A Merchant Cash Advance is not applicable to all businesses

One thing to note about is the importance of a business’ card payment terminal to a merchant cash advance. This means that there needs to be a high number of sales that is made through card payments, and a business, even if it has steady sales, if those sales are predominantly made in cash or invoice sales, then the business would not be suitable for this kind of business loan.

Interest Rates can be higher compared to other business loans

Business loans come in all shapes and sizes, and that goes the same with the interest rates that come with the business loans. Comparing the interest rate of usual Merchant Cash Advance loans to other existing loans, there is a huge difference when it comes to interest rates. This is usually the case especially when it comes to unsecured business loans, the interest rate is higher because of the fact that it is unsecured.

There are limits on the amount a business can borrow

The limitations would actually differ from one business to another as the loan amount is based on the business’ average monthly revenue. While some financial institutions consider the whole monthly revenue, some lenders only consider the revenue made through the card terminal transactions of the business. The amount loanable may not be large enough for the actual need of the business.

A Merchant Cash Advance Loan is not a long-term funding option

Due to the nature of a merchant cash advance, this type of business loan is not a loan that a business can use when it needs something for the long-term. The high interest rate of a merchant cash advance is also not a great factor for something that is long-term. Usually, this type of business loan is only for short-term cash relief.

KNOW YOUR TERMS IN A CASH MERCHANT ADVANCE LOAN

With all of the terms and conditions that various business loans have, it would be easy to get quite lost if you aren’t familiar with some of the common terms that are used in Merchant cash advance loans.

Principal

This would refer to the amount the business is looking to borrow and the amount that they must repay. Upon approval of the merchant cash advance loan, the principal is the size of the loan of the business. A principal is reduced upon payment of the loan amount.

Factor Rates

Upon payment of the loan amount, the payment is divided into payment of the principal, and payment of the fees that are determined by the factor rate of the loan given to the business. The factor rate equation is usually easy to compute. If, for example, the principal amount of the Merchant Cash Advance is 10,000 Australian dollars and the factor rate is 1.2, the total amount that needs to be paid back is 12,000 Australian dollars (10,000 x 1.2). The factor rate differs from lender to lender but usually ranges around 1.09 to 1.5 factor rates.

Payment Period

Like all the other loans, the payment period would refer to the timeframe that the business has in order to pay the Merchant Cash Advance Loan. The usual payment period for this type of business loan can range anywhere from three months to 1 year or 24 months.

Frequency

Remember that in a merchant cash advance, payment for the principal is automatically deducted from card payments, while this is true, some lenders give the business options for other payment plans. The frequency meant here means how often a business will and can pay the lender.

Percentage deduction of credit card sales

A business is able to pay a merchant cash advance loan through a percentage deduction of credit card sales. A percentage deduction of credit card sales is a portion of the sales made by card through the business’ card terminal that is automatically deducted to serve as payment for the principal. The percentage usually varies by the lender but is usually within 5% or 20% depending on the terms and conditions given and agreed upon by the business.

WHAT CAN A MERCHANT CASH ADVANCE BE USED FOR?

While there are a variety of reasons that a business can have with regards to getting a merchant cash advance loan, there are several reasons that are common with the businesses that applies for this type of business loan, here are a few:

Relief for the Cash Flow

This is usually what businesses have a problem with. A big percent of businesses has experienced difficulties with their cash flows, and while some may be able to get through them, other businesses are left unable to pay their obligations and sometimes even their employees.

Because of the quick approval of a merchant cash advance loan, the amount of money lent can be used immediately for supplies, materials, wages, distribution, and even events.

Sudden and Unforeseen expenses

A merchant cash advance will be able to help businesses with sudden and unforeseen expenses. Businesses can use the cash advance for maintenance of equipment, or even repairs, cover professional fees for services needed, or any other hidden expense that can pop out anytime.

IS A MERCHANT CASH ADVANCE RIGHT FOR YOUR BUSINESS?

This type of business loan may seem like a good option for a business loan for your business, however take note of all the advantages and the disadvantages of getting a merchant cash advance loan.

If your business is in need of a short-term loan for several unexpected expenses, then, yes is the answer. But if your business checks out too many disadvantages, it is better not to opt to try getting one at all.

Remember that in business loans, business owners must remember that the loan applied for adds to the capital of the business, rather than help a business achieve a certain capital. Use a merchant cash advance to give your business a head start, and then from there you will be able to set yourself apart from your competitors.

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Small business loans and financing options can be quite confusing to a small business owner and if you are part of the 40% who applied for a small business loan in order to fuel growth for your business, then you may need a little help, and a small business loan broker can be key.

A business loan broker can be key as this individual serve as a guide for small businesses in navigating the usually tricky waters of small business loans and financing options.

BUSINESS LOAN BROKERS – Who are they?

Small business loan brokers are those who are commissioned by lenders to help small businesses and assist them in choosing the right business loan provider for their business. They usually get a commission price from the lender that the small business will eventually choose.

A small business loan broker has various business relationships with a lot of lending partners or financial institutions, they are also equipped with knowledge about the vast world of business loans and financial institutions. Most of the time, small business owners’ best bet in finding the best loan or financing options for their business is through a small business loan broker.

Small businesses that work with a small business loan broker are usually able to find better loan terms for their business and are able to know and meet other potential lenders or financial institutions that the business would not have found on their own.

Different kinds of Small Business Loan Brokers

There are a lot of small business loan brokers out there and there are also different kinds of small business loan brokers. Oftentimes, a broker will only focus on one type of business loan or at a particular industry.

To help you get a vision of what the different kinds of small business loans are, here are some types that you might be able to encounter when it comes to small business loan brokers.

Small Business Administration Loan Brokers

This kind of small business loan broker can help small businesses in getting through to traditional financial institutions or lenders, usually these are banks and credit unions. The SBA loans have requirements that are very specific which most small businesses find challenging to even just qualify, let alone be approved.

Enter the small business loan brokers they will know the qualifications that the business has in order to be approved of the different types of small business loans that are out there, with them being able to walk the business through any application process for this kind of loan.

Start-up Loan Brokers

True to its name, these brokers specialize in start-up loans for businesses that are in the first phases of the business. Usually, businesses who do not have long and a solid credit history can find being approved for start-up loans tricky. 

A small business loan broker that specializes in start-up loans will be there to save the day, and usually because credit history is spotty during these times, they might require putting up a collateral as security against the loan.

Commercial Loan Brokers

Small business loan brokers that are experts in this kind of business loan are presumed to have wide knowledge about a lot of financing options, and have business relationships with most, if not all, of the lenders that they know offer these loans. This king of small business loan broker is also usually called the general loan broker.

Equipment Financing Brokers

For small businesses who are looking to purchase new equipment that they would need for their daily operations. There are, of course, small business loan brokers that can help any business owners looking for this kind of loan. Bad credit? Then worry not as the loan brokers know exactly which financial institution to lead you to in order for the business to get the loan that it needs.

Factoring Brokers

For businesses that are in the textile industry, factoring is one of the possible small business financing loans that one may encounter. This kind of small business loan entails cash for the business to be able to stay afloat until their outstanding invoices are paid by their customers. A small business loan broker will be able to help out this way and help the business find a factoring broker who will take care of running after the unpaid invoices while being able to loan money to the business that it needs.

Merchant Cash Advance Broker

These are small business loans for companies that do not have good credit scores, have a need for quick financing and are actually good at being able to manage their finances, cash advances can be the answer when the time comes should the business need to access capital that is needed for the business. This is a kind of alternative lending which involves lenders looking at the revenues and cash flow of the business rather than looking at the business’ credit scores. A merchant cash advance brokers are small business loan brokers who specialize in helping businesses look for cash advances fit for their business. Although a cash advance loan is one of the most expensive loans out there, it is still a viable option for small businesses when it comes to capital financing.

Big Benefits A Small Business Loan Broker can give the business

Knowledge that only small business loan brokers have and the relationships they have with possible future lenders.

Really good small business loan brokers can help get businesses in their search for a business loan in the loan market. They will be able to use all of the knowledge and expertise they already have and all of the business relationships that they have in order to recommend and provide loan options that are the most suitable for the small business they are helping. The really good small business loan brokers are actually able to provide a short list just by hearing what the business needs, and the guarantee that loans that are a bad match with the business will altogether be removed from the equation.

If a business owner is only aware of standard business loans and are not aware of what other business loans are available out in the loan market, then a small business loan broker can be key in helping the business find the correct business loan and ensure that they get the most suitable business loan for their everyday transactions.

The most important part of this is that the small business loan broker will be able to reach a lot more business lending institutions than a regular small business looking for a loan. This saves the business precious time that they could have spent in looking for actual lenders to apply loans from.

Be able to work with financial institutions and loan providers. 

Banks are often the number one go to lenders when it comes to business loans. This is because banks are often the most trusted financial institutions all around the world, and while they might have the strictest of requirements, they are still the number one business loan provider everywhere.

If a business owner is bent on getting a small business loan with a bank, the small business loan broker’s business relationships have good relationships with banks too! One of the key things here is that the small business loan brokers will be the ones to handle most of the tiring requirements needed in the bank application process for the business loan. If the business has a good credit score, the banks and the small business loan broker will have an easier time to both process and approve the loan application.

How Much Does Getting a Small Business Loan Broker Cost?

There is more than one way of actually paying for the services of a small business loan broker. The typical way is when a business loan broker charges the business for about 7 to 17% of the total loan value that the business was able to achieve because of the services of the small business loan broker in the form of a markup fee included in the loan interest rate of the loan payable.

In getting the services of a small business loan broker and paying for it, transparency is key. The business should be made aware of all of the interest rate from the loan and the markup that their services entails. If the broker is reluctant to provide the breakdown of just how the rate is calculated, then that should automatically become a red flag and the business should be aware that the loan broker might be charging unreasonable high fees.

At times, the small business loan broker may ask to be paid upfront instead of having it included in the loan payable. Most of the time, small business loan brokers will only charge the business for their services when the business actually and successfully manages to secure a loan. Other small business loan brokers will charge you a fee just for their services in helping the business find a business loan.

Can a business put its trust in a small business loan broker?

The best business loan companies in Australia have been recognized for their top notch performances for the past 2 years, the praises that the clients sing vary from the different financing options available with the loan companies, most of which they would not be able to get without a small business loan broker.

But what all small business owners and small businesses alike should remember is that when it comes to protection for small to middle sized enterprises (SMEs) regarding small business loans are less than that of consumer protection offered when it comes to personal loans. This means that small business loan brokers are subjected to less regulations than the actual financial institutions themselves. A small business owner should be one hundred percent sure that the small business loan broker has the business’ best interest at heart when it comes to them acting as the middleman between the business and the financial institution.

Small Business Loan Brokers have all the motivation in the world to maximize their profits, and this means that they can easily be swayed by cheap tricks of the trade. They may also receive a lot of benefits or incentives from the financial institutions that they are serving and may end up only pushing for that certain institution instead of what actually is best for their clients. In line with this, there has also been an increase in the number of scammers that guise themselves as small business loan brokers.

The most popular scam today would be the “advance fee scam.” This is when a scammer pretends to be a small business loan broker who will ask for a processing fee up-front. Along with this comes various promises including false pretenses of a 0% interest rate offer from various financial institutions that the scammer is supposedly working with. Once the scammer is paid with the upfront fee, the business will never hear from them again. To make matters worse, the business might have also gone and shared information not meant to be shared to anyone like the business’ bank account or some insider information on the business itself.

All in all, bringing up the idea of working hand in hand with a small business loan broker can guarantee negative connotations with it. There will always be a lot of negative connotations due to the fact that there will be a lot of sharks waiting for a quick buck. But while this one is true; it does not mean that all small business loan brokers are sharks just waiting for gullible businesses to pounce on them. Businesses should weigh carefully their decisions on whether or not to get the services of a small business loan broker.

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Financial institutions or lenders of course need to ensure the risk that comes with lending money in general. When a lender has great confidence in a person or business applying for a loan, the best deals, terms, conditions, and the like come out to form an agreement. There is usually an involvement of security with loan funding like these.

What is a personal guarantee?

A personal guarantee is when a third person, on behalf of the lender, promises to pay for the borrower when or should the borrower default on payments. A personal guarantee is common when it comes to businesses that are owned by corporations or corporations themselves when asking for a loan. This is for the reason that a corporation is a separate legal entity. What is contemplated is that lenders want to ensure that the individuals behind the corporation can actually handle paying off the debt should the business default on payments.

Normally a personal guarantee is signed by a director, and is usually for a very specific amount, and the personal guarantee gives the lender the legal right to come after the signor should the business or corporation default on payments. The difference between sole proprietorship or partnership run business is that the sole proprietor and the partnership are the ones liable when getting a business loan, thus, the personal guarantee isn’t actually needed.

While this is the most common time when a personal guarantee is needed, there are other financial institutions or lenders that can require a personal guarantee for those applying for business loans.

Can I qualify for a business loan without a personal guarantee?

The answer is yes, although everything will come down to being able to choose the correct type of business loan needed and fitting for the business. This means that the business should also be in a strong financial position. Financial institutions will actually consider personal guarantees as a backstop should the business not have a long enough track record, lack proper value in their balance sheets, and do not have clear and predictable cash flow income.

But if a business actually has substantial value that shows in its balance sheet, then there is actually a reason for the lender to negotiate with the borrower without having the need for a personal guarantee.

Usually, a business that has substantial value in its balance sheet, tangible assets, strong sales ledgers, good stock levels, and a steady working cash flow. Combine everything together and the borrowing business can expect that a lender would not need to ask for a personal guarantee.

Business loans in general

Before anything else, a business loan is a financing option for businesses where they are lent a sum amount of money that the business agrees to pay on an agreed schedule and within the correct time, paying the amount loaned with interests and fees that come with it. In Australia, there are a lot of different types of business loans that help businesses continue on with their daily operations.

 A business can choose to pay in fixed or variable rates, all depending on the schedule that will be agreed upon. The frequency of the repayment can also be chosen by the business, and they can either choose to do it monthly, quarterly, or even yearly. The loans differ in payment terms but usually are paid from 1 up to 30 years (for really big business loans), and can be secured with security used as collateral. However, there are also Unsecured business loans which do not require collateral, but have usually higher interest rates. Every interest rate is different as well, all depending on several factors decided by the financial institution or the lender.

Business Loans with no personal guarantee

What if a business would need a significant amount of money in order to invest in something that the business needs, badly? But the main problem is that the owners would not want to disrupt cash flow as they may incur problems about it. The answer to this is fairly simple, a business loan is the most logical choice. While there may be a lot of business loans that would require a personal guarantee, this is not always the case. There are always financial institutions or lenders that are ready to accept a charge over business assets. In order to convince a financial institution or a lender, the business must fit perfectly into the category that the financial institution requires.

Can I get a business loan with no personal guarantee?

For this type of loan, the business that you own must at least have 2 years of history with credit transactions and a solid financial standing. The business must also have positive cash flow trends and a profitable performance. Take note that the lender will also have to take a personal look at the business owners and the business itself.

Benefits of a business loan

These business loans are the number one form of financing for businesses. This is because a business loan is simple enough to understand: the borrower applies for a loan, get it upfront to use for the benefit of the business, and then start repayments according to terms and conditions agreed upon. If a business is successful in obtaining a business loan, then they can easily start budgeting their loaned amount for the business. A business loan can be fairly easy, especially if the business already has the hang of things.

Invoice finance with no personal guarantee

Invoice financing is a type of loan where a business that has slow payers or a ton of unpaid invoices uses them as sort of collateral in exchange for the total loan amount per invoice. Usually a business can get 80-85% of the total invoice price upfront. The rest will be received when the invoices are paid for and minus the fees the lender has. In exchange it is actually the lender who will run after the debtors.

This type of financing is a solution that does not require any personal guarantee from the borrower. This is a solution for businesses that are suffering from slow paying customers as this type of financing option benefits the business well, having the loan amount given to them upfront while not having to worry about running after their credit customers.

Can I get Invoice Finance with no personal guarantee?

The answer is yes. Financial institutions that offer invoice finance loans will always solely depend on the invoices that are presented as collateral to them. While they would still take a good look at the overall financial capability of the business, the totality of the unpaid invoice presented to them still bear greater weight and oftentimes, there is reason to expect that there no longer needs a personal guarantee from the borrower. Though a lender may sometimes require a small personal guarantee, usually 10-20% of the facility limit.

Benefits of Invoice Finance

Businesses that find that they are tied up in a lot of outstanding balances owed to them are the most fitting borrowers for this type of business financing loan. The business’ main assets will serve as the debtor book that holds all the outstanding invoices of the business and using this as a leverage can be a smart move for the business itself. This type of loan is well tailored to any business applying as the loan amount is proportionate to the actual revenue a business is expected to receive. The more invoice that you actually have, the bigger the credit that a business can access.

Trade finance with no personal guarantee

Trade financing provides a business an amount of capital up front that is solely based on the wholesale orders of clients that they will pay in a future date. This business loan type depends on actual confirmed orders from the clients of a business. This means that if there is already a purchase order from a client, for example, a business can take advantage of this and be able to put up front with the financial institutions the cost of the production, stock, and delivery and actually be able to provide what the client ordered. This type of business loan funding actually goes hand in hand with invoice financing.

Benefits of trade finance

This type of business financing loan is actually another way of improving a business’ working capital. This type of business financing gives a 150-day credit wherein which time a business can both receive and sell stocks. This can help as your own cash will not be tied up in the business cycle. This type of financing also works well hand in hand with invoice financing.

Trade finance is another source of credit to improve your business’s working capital and it works like a dream with invoice finance. Trade financing will take care of the funds on making of the purchased goods up to the point of selling it. Then, Invoice financing will take over and fund the business for the period until the client is finally able to pay.

Are there other ways of getting a business loan with no personal guarantee?

The answer is, again, yes. There are a lot of other ways into looking at other financing options if you have already exhausted every other option and find that you cannot get a business loan with no personal guarantee. Here are a few things you can try out:

Look for Investors – business investors will be a smart move; however, a business owner must be ready with a well-made business plan and should be ready to give away a part of any future returns.

Look and apply for government grants – although the business is not guaranteed to get anything, and if they do, it might not be the amount that the business wants. But getting a business grant from the government will be of big help to the business.

Tap into your own savings – this is actually a really big risk and the business will have limited resources. On the other hand, there are no strict repayment schedules to be followed which is already a big thing.

Ask personal loans from friends and family – this is likely to have low interest rates if there are any at all. However, one big drawback is that this can cause a lot of relationship issues should the business that you are putting the money into fails.

In the long run, not having the proper credentials to be approved for a business loan with no personal guarantee should not stop a business owner from getting the finance that the business needs in order to maintain, sustain, or grow the business. The option for getting business loans with no personal guarantee is only one option, there are a lot more types and kinds of business loans out there that can fit the business. Furthermore, the business can slowly work towards actually fitting into the requirements that financial institutions have that will make them approve of business loan applications with no personal guarantee. It will all depend on the business’ situation, including the main purpose of the application for the loan that the business needs for. Generally, it is possible to get a business loan with no personal guarantee easily.

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The post Getting a Business Loan with No Personal Guarantee first appeared on Bizzloans Australia.