Businesses are finding it increasingly difficult to gain business loans to operate and expand their operations. Business owners feel the banks aren’t interested in their plight once they have exhausted their security.
Some owners feel they have no choice but to turn to expensive credit cards or borrow from family to gain the funding. They suffer through the added pressure of high-interest rates or paying back mum and dad’s super. But it doesn’t have to be that way; there are alternatives to securing much-needed finance.
Why it’s so Difficult for Businesses to Obtain Finance
There are many roadblocks to businesses achieving the funding they require. Many banks require security and it is easier and cheaper for them to fund home loans than it is business loans particularly when the business loan amount is relatively small.
There are various reasons why a bank may not be interested in lending to business including:
- the short length of time you’ve been in operation
- lack of security
- market factors such as competition
- economic factors including a bank’s decision to cut back on small and medium-sized enterprise funding at the time
- outdated financial statements may not reflect current borrowing potential
- any seasonal issues that may impact on paying back a loan
- poor credit history
- rapid expansion
Use a Third Party
Some business owners don’t realise they have other options. Particularly in the early years of business, they think going cap in hand to one or two banks is their only option. They financed their home that way so they believe it’s the only way of financing their business expansion. Often, they start asking around or researching other options and find others in a similar situation have had success with a finance broker.
Many of our clients tried going directly to a bank and when they were knocked back, they were referred to us. They were relieved that we were able to achieve a positive result. We may research and contact 10 to 15 banks to find the best deal for a client to ensure we gain approval with the best possible rate.
One of our clients has built a multi-million dollar business that wouldn’t have been possible if he hadn’t used our broking service. The banks had told him ‘no more’. If he’d taken no for an answer, he would still have a small business or would have given up years ago due to the frustration of not being able to grow the business.
Separate your personal and business finances
Sure you may need to use your personal assets as a way of financing your business but otherwise personal and business finances should be kept separate. We’ve helped clients untangle the two so that they could gain a favourable outcome with their business application. The way finances are set up can have an impact on whether a financial institution is willing to take you on as a customer. They don’t want messy deals complicating their system and a few changes made before the application can change the outcome.
Get your paperwork in order
We’ll help by telling you exactly what paperwork you will need. Some loan applications require an owner to have everything from a detailed business plan and years of business records available. Others will only need basic information, much of which we already have on file for existing clients. When this is the case, our brokers can do most of the legwork on behalf of our clients and get them involved towards the end of the process, saving them time and money.
Funding is a necessary part of most businesses. It’s either needed to survive or thrive. Use the resources of a broker with experience in your field to ensure your business isn’t the victim of limited funding.
If you need access to funding for your business, get in contact with us. We’ll review your current arrangement and see if we can make suggestions to securing the funding you require.