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Blog   »   August 2015   »   Borrowing Money For Your Business

Borrowing Money For Your Business

Borrowing Money For Your Business

In an ideal world your business would provide a service, get paid, and then use that money to buy what you need. But it is not an ideal world.

Fortunately there are many ways a business can obtain the cash it needs to operate.

At Hunter Business Finance we are able to access many different loan types including:

·         Equity Loan

·         Commercial Hire Purchase

·         Chattel Mortgage

·         Novated Lease

·         Lease

·         Investment Loan

·         Car Loan

·         Home Loan

·         Bridging Funds

·         Debtor Funding

.         Overdraft

            .         Business Loan

Remember any loan for your business can be obtained for you through Hunter Business Finance, and as it is with most things, it is just a matter of determining the rate you wish to pay and what collateral you use to get the desired result.

Two Major Requirements of a Lender

·         Credit History

·         Ability to Repay

We cannot understate lender's reliance on these two areas and how much of an emphasis they place on these two areas.

Credit History – simply put, this is the historical record of how you treat debt repayment. Some people are at a loss to understand this simple process, but it basically comes down to ensuring a payment or debt is made on time when it’s due. If you are going to be late, advise the lender beforehand, don't wait for them to call you.

For Example:

If you have a 4 year contract structured with monthly payments and you finalise it after only 3 years, but each of your monthly repayments had been late or only paid every two or three months, this account is deemed to be very slow even though it was finalised early. The lender will not want to lend to you again – regular monthly repayments are what the lender wants. Remember, all lenders report to some credit agency so chances are they have advised them of your performance.

Lenders are also statistically motivated. Statistics show that of the  borrowers that default on bank loans, a massive 80% of these defaulting borrowers have had or do have small unpaid or slow debts to phone companies, bank cards, electricity or water rates. So if you think these small credit issues aren’t worth worrying about – think again. Of course just because you have had a default doesn’t mean you can’t get a loan, it just means that you may not qualify for the cheapest rate.

Ability to Repay - Lenders are generally more comfortable lending to established businesses with a proven record of profitability. So while it is a business' right to minimise tax by legitimate means (which are easily identified by a competent broker and highlighted to a lender), it is not acceptable to just say you get a lot of cash as this won’t cut it with your broker, the bank, or the ATO. There are some loan products where full financials or tax returns aren’t required, but these products are generally only offered to business that have been established for many years and are able to demonstrate good credit history in the past.

Some other areas a lender will take into consideration include “Collateral” and “Management”.

Collateral - The type of loan you choose will determine the collateral or security required. At Hunter Business Finance we are strong believers that most loans should be "stand alone", that is they are not cross collateralised with other loans or assets you already have. Overdrafts are however generally tied to some form of real estate security or charge over company assets.

Management - The management team and the experience of the principals is critical for newly established businesses and will in most cases determine acceptability to the lender. Again this is where the experience and competence of your broker comes in, and it is their job to accentuate the positives of the applicant. Brokers such as Hunter Business Finance know what lenders want to see and what information to highlight. There may be instances when a potential borrower confuses what they think would be a positive to the lender which in some cases is definitely not, so regardless of what type of finance you’re after it’s worth using a professional to get it done right the first time.

 

 

Posted: 4/08/2015 11:54:11 AM by Hunter Business Finance | with 0 comments

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