So you want to start a small business, buy a franchise or establish a home business – but you need a loan to get started and the bank have asked for a business plan with financials and cashflow projections!
You really just want a simple business loan!
There are plenty of banks and finance companies that offer loans, but you really want a small loan for business purposes and you do not want to pay through the nose for it either.
Should You Try A Mortgage Top-Up First?
In many cases a bank will offer a mortgage top-up and this is may be the cheapest form of finance but banks can often treat your application like you are a corporate.
Finance brokers will tell you they hear of many occasions where the bank are unable to assist or impose “rules” that make the process too hard.
Of course banks have reasons for being cautious with so many small businesses failing; however if your business idea does not work then you have increased your debt just slightly, and you can still easily afford the repayments.
Non-Bank Lenders Have Small Business Loans
There are times when dedicated loans for small business suit better than a mortgage top up.
Firstly, when you do not have a home or a mortgage then you need to source a small business or personal loan. Also small business loans or personal loans can be suitable where you do not have enough equity within your property, or where you do not want to involve everyone in a loan.
At times you may select a number of loans for specific purposes like a vehicle loan obviously to purchase a vehicle, a personal loan or small business loan to purchase the business, the computers, set up the office and buy inventory and then you may want to arrange invoice or debtor finance if you offer terms of trade.
With a mixture of requirements a finance broker can be essential as a single bank or finance company may be limited with what they can offer.
One of the advantages of arranging pre-approved vehicle finance is that you can then purchase a vehicle privately or at auction where often you can make significant savings.
Finance brokers can access vehicle finance for up to 100% of the purchase price of a vehicle and can even finance the other expenses with getting the vehicle on the road including extras that may be required (tow bar, roof racks, signage) and can also include in the finance a warranty or insurance if required.
Personal Loans Or Small Business Loans
Every small business is different and therefore requires a different amount of finance to get established. The key thing with any new business is not to start off underfunded as you will not be as successful.
If you are buying a franchise you want to ensure that the upfront cost is financed fully.
When you set up a business from scratch you need to fund the full set-up costs and ensure you have some funding for marketing so that you can get the business started and turnover up to speed as soon as possible. Businesses often fail because of a lack of funding and therefore you have to start slowly, when in fact starting with a marketing campaign may have made a huge difference.
Get Your Brand Established – Finance If Needed
Make sure that you create your brand to promote. Your brand might require a graphic artist to create a logo and brand look that should flow thorough on all of your marketing collateral including your website, social media presence, signage, business cards, stationary, uniforms and any marketing material that you have. A lot of new small business owners will want to get the business started before investing in their brand, but I believe this is a mistake – if you are dedicated to being successful then you should budget on this spending as part of your start-up cost.
Funding Your Initial Inventory (Stock)
If you start a business with a small amount of inventory then you are going to limit your success.
There may be a settling in period when you are establishing what is required, but once you know what is selling then you need to make sure you do not run out of that product.
This of course depends on your suppliers and your business model. Businesses with an online presence are proving very popular especially as they can be run from home, and many of these businesses can be operated without having to hold inventory as you purchase on demand and have delivered directly from your suppliers. On the other hand if you are importing product to resell then you might have minimum quantities that you need to order to ensure you get the right price or to make the shipping efficient, and there is also often a few weeks lead time to consider.
Invoice Finance Or Debtor Finance
A lot of businesses do not offer terms of trade, but this will be dependent on who your customers are and what is expected by them.
If you do need to offer payment terms you should ensure that you have professionally written terms of trade and if you have seasonal products or want to grow your business then some form of invoice finance or debtor finance facilities can be a good idea as unlike a bank overdraft the facility will grow with your sales.
We Call This Small Business Finance
When you hear the banks and finance companies talking about solutions for small business they are often going to try and fit your business into a box, but as finance brokers we know each business is different and everyone’s situation will be different to.
Assess all risks too.
Nothing in life can be done without any risk – and small business is not guaranteed to be a success – even with the best planning. Talk to us about managing the risks.
We also believe that you should be the manger of your business – not the bank.
The best small business finance is something tailored to you.
Stuart Wills is a small business owner and finance broker that would love the opportunity to look at your business and help you source a small business finance package to suit.
What Is Your Business Model?
There are some great business models that have evolved over the past few years with the world and internet as we know it today. With the internet you can set up a business with very little cost and be your own boss with a Global business operating 24/7 while you enjoy life in New Zealand.