So you are at a stage in your business where you need finance to either purchase new equipment, upgrade your technology, or cover you for cash flow fluctuations, so where do you go?
Grants are a great option as, unlike loans, there is no repayment. They also don't need the owners to surrender any equity in the business.
Your Local Office of Economic Development will be able to
assist you in information such as government portals, tendering processes, chambers of commerce.
Your bank will have a variety of options to choose from. Some examples are: Overdraft Facility, Line of Credit, Fully Drawn Advance, Invoice
Factoring / Financing, Asset Based Lending.
Many banks will offer an overdraft facility, currently offered between 1.75% and 12.25% p.a. The benefit of an overdraft facility is that it is flexible - you only borrow what you need at the time. The amount of money you can access is generally lower than a personal loan, and fees for an overdraft are usually higher than personal loans. Be aware, although it may be easier than a loan, you can be penalized should you payout your overdraft early. An overdraft facility sits against your bank account, and you can withdraw funds through an Automatic Teller Machine.
A line of credit is a loan, unlike a personal loan. However, you pay off the interest-only, leaving the principal. Once you repay the loan, the funds are again available for you to use. The monthly interest is calculated on the portion of the line of credit that you have used.
A fully drawn advance loan is a loan in which the borrower receives the principal at the start of the loan and agrees to repay the principal with interest according to a predetermined amortization schedule. They are long term loans predominately used to purchase assets.
Factoring allows a business to obtain immediate funding based on its future income. For example, when you sell a Debtors ledger.
Also known as Receivable finance and Invoice Factoring.
Loan/cash flow lending
This type of lending allows a business to borrow money based on its projected future cash flow. i.e. when a company is attempting to meet its payroll obligations and uses cash flow finance to pay its employees now and pay back the loan later.
This function allows companies to borrow money based on the liquidation value of assets on their balance sheet.
They are used in business to business agreements when you purchase on credit (without paying cash upfront). Trade Credit awarded on trading terms of either 30,60 or 90 days when full payment is required.
Should you be under financial stress, there are available resources for you Financial Counsellor Financial counsellors will assist you with issues such as bills or fines you're struggling to pay, debt collector harassment, disconnection of utilities, home eviction, car insurance when you have no insurance and debt with the Australian Taxation Office.
Call 1800 007 007 to reach the National Debt Helpline. A non-profit service that assists with financial problems.
Small Business Support Line 1800 413 828
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