If you’re self-employed or a small business owner, growing your business can be a challenge.
You may find your expansion plans are frustrated by irregular cash-flow, insufficient or out-dated equipment, or business premises that are just too small.
Sometimes you may even find yourself missing out on opportunities because you simply don’t have the money to hire the additional staff you need.
That’s where credit advice from a professional mortgage and finance broker can make a huge difference to your success.
Clever financing options can really open up opportunities for small business owners and the self-employed.
Here are just a few alternative financing options that you could use creatively to help your business grow.
Did you know that over 400,000 small to medium sized businesses use cash-flow financing every year?
This is a common form of small business loan that is backed by your company’s expected cash flow, instead of using collateral that is based on your company’s assets.
If your company is going strong and you need an injection of cash to fund growth or capitalise on your opportunities, cash-flow financing may be able to give you access to up to $250,000 based on your business performance alone.
You can use the money for any worthwhile purpose – financing for tax purposes, purchasing inventory, managing cash flow, bridging receivables gaps, staffing on new contracts – whatever your business needs.
If you want to be competitive in your business, the right equipment at the right time can be vital to your success.
Outdated equipment can really limit your business activities and can cause you to miss out on new opportunities or larger projects.
There are several different ways you can go about financing the all-important equipment your business requires.
For example, an equipment loan – also known as a chattel mortgage – can give you access to finance for just about any kind of equipment from a small truck for your plumbing business to major earthmoving equipment, or even cookers and fryers for your new restaurant.
Alternatively, you may want to consider a Finance Lease to obtain the equipment you need.
Leases and Hire Purchase agreements often carry additional tax benefits* for small businesses and the self-employed, such as input tax credits for rental and other charges that are subject to GST.
Commercial Property Loans
Unless your business is totally online or home-based, the right business premises can also be vitally important to your success.
For example, being able to afford premises in the right location can really boost the success of a restaurant or retail outlet.
With some types of businesses leasing may always be the better option, but actually purchasing premises can provide your business with a valuable asset and significantly increase its resale value if you ever want to sell it as a going concern.
If you want to purchase premises for your business, we can access a wide variety of suitable loans from lenders who are willing to provide mortgages for commercial property.
Like most residential home loans or even property investment loans, it will be necessary to assess the financial situation and circumstances of you and your business to determine how much you can borrow.
Generally these loans attract a higher deposit or contribution towards the property as the bank LVR’s range from 65-75% and the interest rates aren’t tied to the residential lending rates but are geared towards a “price for risk” model, whereby the greater the contribution and stronger the business, the better your interest rate will be.
Conversely, a start-up business will traditionally have to pay a higher figure if they can’t support or validate over 2-3 years their trading history.
Loans using your home or other residential property as security
One of the cheapest options has always been to use your home or another residential property as security for your proposed business loan.
Banks generally like this a lot more and this gives you more options to consider for your financing such as Overdrafts, term loans, funding for stock, funding for cash flow and future business growth.
As a residential property is more widely acceptable to a bank as security, you should also be able to access funds up to 80% LVR and avail of cheaper or better interest rates than what a business or commercial loan may attract.
The other great aspect of using a residential property as security is that you can normally obtain longer loan terms of up to 25 years whereas business and commercial loans generally attract loan terms of between 10 & 15 years.
This can have cash flow constraints on a new or growing business.