Business lenders that offer tailored solutions
No two businesses are alike, so when applying for a business loan it’s important to find to a company that understands your individual needs and will offer you a tailored solution.
Whether you’ve been in business for decades or are the proud owner of your very own garage start-up, finance is certainly on the most critical, demanding and stressful matters you’re going to have to deal with – and, what’s worse is that it will be an ever present one.
To make the best possible decisions regarding your ongoing business finance needs and options it’s important to do your research and to keep abreast of new developments in the business finance sphere.
In this article we take a general look at all the different business funding and business finance options that Australians have at their disposal as well as offer you some valuable advice, tips and information to keep in mind.
Section 1: Non traditional & alternative forms of business finance
Prior to considering traditional bank loans and finance options you should always consider alternative options which include bootstrapping, savings, loans from family and friends, angel investors, venture capital and crowd funding.
These non-traditional forms of financing are, for obvious reasons, the best way to finance a start-up business, grow a small business or expand a thriving business.
Bootstrapping is only viable to entrepreneurs who intend on starting a business and do not need any or much equipment, a large office or staff to get going. Bootstrapping means starting your company with no or, very, very little, money and use any income generated for the growth and expansion of the business.
The best example of a successful company who bootstrapped its way to success is Envato. Envato (a website theme, plug-in and design marketplace), reportedly bootstrapped its way to being one of the most successful Australian companies with over US$50 million in annual revenue.
Savings & loans from family & friends
This is one of the most self-explanatory options for business financing and is also likely to be one of the cheapest, fastest and easiest ways to get a business going or growing. When using savings you won’t have to pay any interest or fees and, best of all you won’t have to answer to anyone!
When borrowing from friends or family, whether you decide to pay them interest or just repay the sum of money lent to you, a contract or promissory note should always be created to seal the deal.
Any budding entrepreneur or business owner would have heard about angel inventors from one source or another. This form of generating start-up capital or capital for expansion - by offering shares of your business in return for the capital needed - may sound like a dream come true but, it does have its downsides. One such downside is the fact that the angel investors may actually have a say in the day-to-day running of your business and may, somewhere down the line, decide you’re not the fittest bloke for running the show.
Venture capital & crowd funding
Crowd funding allows you to raise capital for your business by pre-selling stock or by selling equity. Although it doesn’t have the best reputation many businesses use this option successfully and there are many platforms dedicated to this form of financing.
Section 2: Traditional & Bank finance options
Term business loans
Business term loans are one of the most sought out types of business loans and essentially offer a once off loan with a fixed or variable interest rate that is paid in regular repayments over a set period of time.
This loan can be used to fund business growth as well as buy equipment, open a new branch and just about anything else. Terms typically range from 6 months to 10 years but can go as high as 30 in certain cases.
Business lines of credit or overdrafts
This is a form of business credit that is typically used to manage the cash flow of an already healthy business. Most often offered to medium to large Australian businesses – overdrafts and lines of credit are an essential part of any growing business.
There are also alternative providers of lines of credit that will conside3r smaller businesses and have less stringent qualification requirements.
Factoring or Invoice finance
Factoring is when you sell your business invoices to a credit provider who then pays you immediately and more often than not, pursues payment from your clients. Invoice finance is almost identical to factoring but allows businesses to choose which invoices they want to “sell” or, cashed. Lender who offer this type of finance include certain banks, credit unions, alternative online providers and, most recently peer-to-peer lenders like Timelio.
Peer-to-peer business loans
Finally, a good option for profitable and growing businesses is to take out a marketplace loan or, a peer-to-peer loan for businesses. Investors will essentially bid to buy your loan and, you will typically experience faster approval than with the larger banks and lower rates.
Section 3: Tips & advice on applying for a business loan
Since the term “business loan” can include such a wide range of credit types it is important for business owners and shareholders to carefully consider their needs and which type of credit solution is likely to best meet those needs. If you need guidance, speak to an expert or experienced advisor that can offer you a second opinion and help you make the best decision.
Prior to making an online loan application it’s advisable to review all of the alternative methods of financing a start-up business or an expansion project as discussed in Section 1 of this business finance guide.
While large banks have the infrastructure and backing to offer the lowest rates on their loans they are not always the ideal solution and other alternative credit provider such as peer-to-peer lenders and boutique lenders who offer less stringent application requirements, more flexible terms and the kind of personal service that you will not get anywhere else.
Finally, once you’ve made a decision on the best type of business finance for your specific needs don’t be afraid to take the time to ask around and do your research. While you may be tempted to go for your existing bank or a credit provider you’ve been with for years, always consider at least 3 lenders and ask as many questions as you need to. If possible try to make use of loan comparison websites to narrow down your search or simply check the list of lenders we’ve gathered for you below.
Section 4: Documents required for a business loan application
Most of the Australian business credit providers that we’ve covered on this site have similar application requirements however, it’s important to note that you should always do independent research on what a specific lender requires before trying to apply. This will save you a lot of time and many headaches!
Here’s a few common application requirements:
- To possess an ABN/CAN
- To have been operating for 12 – 18 months
- To have a specific turnover (each lender differs)
- To link up your financials with their software
- To offer 90 day bank statements
- To provide detailed financials and historical data
- To provide ID documents for all business owners and shareholders
Now it’s time to browse through our list of direct business credit providers to see which one fits your needs the best. You can also use the tables to determine which loan is the most competitive or which meets your amount and term needs.