With the Christmas period fast approaching its time to relax, take stock of the past twelve months and focus on your goals for the New Year. Right?… But you still have the business to run, and staff to pay. Some businesses rely on an uptick in trading during the holiday period, whilst many others wade their way through the muddy waters of the seasonal slowdown. Unfortunately, some get stuck and don’t make it out the other side… don’t be like them.
First of all, as a business owner, make sure you have a solid understanding of your expected costs and outgoings for the next month or two – do you have enough funding to cover holiday pay, rent, stock and other bills? If you don’t, the Christmas period may be a concern for you.
So, let’s take a look at some financing options that may help you through the end-of-year slowdown. And don’t worry, the bank taking 8 weeks to disapprove an overdraft isn’t one of the options.
Unsecured Business Loans
Unsecured business loans have really taken off in Australia over the last seven to eight years. Why? Because of the banks’ inability to lend money to small businesses. The unsecured business loan industry has attacked this opportunity in the market to provide a solution, free from the common pain points you’d generally experience whilst borrowing money traditionally. These lenders will take a look at your bank statements to see how your business’s been trading over the previous 6 months, as well as how long you’ve been operating for, in order to assess your suitability and ability to repay the loan.
“Whilst this funding is far easier to obtain, it’s also matched by higher interest rates”
Unsecured business loans are by far and away the quickest means to get access to the funding you need. Typically, you’re getting funded within just 24 hours. Now, this type of loan is most appropriate when you know business is going to pick up in the New Year, in order to meet the necessary loan repayments. It’s also important to understand the costs to your business. Whilst this funding is far easier to obtain, it’s also matched by higher interest rates that can vary in range significantly. This is where a broker comes in handy, we’re able to find you the best product and lender for your individual circumstances. To hear more about unsecured business loans and the costs to consider for your business, check out my short video:
Debtor Finance
Debtor financing is a great way to support your business, no matter what stage of the growth cycle you are at. It works like a ‘line of credit’ allowing you to draw down on it when needed, such as the holiday period, or for growth initiatives. Essentially, you’ll be provided funding that is secured against your outstanding invoices. This effectively ‘unlocks’ the value of your debtor’s ledger to be used now – when YOU need it, as opposed to when the customer actually pays. Property security generally isn’t required, and the rates are usually better than what’s offered by a traditional overdraft product. Be careful though, if you’re always fully-drawn on the facility, it may not be the best option for you.
“I would say that debtor finance is one of Australia’s best kept secrets”
I was able to build a successful debtor finance company by learning what works and what doesn’t. Having now sold that business, I know how debtor finance companies should be treating their customers. It’s absolutely essential they have a focus on excellent customer service, deal transparency and developing meaningful customer relationships. Capital Plus Finance utilises this knowledge to make sure you get the fairest deal and the best customer experience – To hear a bit more from me, check out this quick snippet:
Secured Lending
Business owners may also choose to use existing equity in property, vehicles, machinery or equipment, as security for a loan. Traditionally facilitated by banks, they may be a bit harder than they need to be, nonetheless still a good option if you do have the equity sitting there collecting dust. Since the loan is backed by real assets, the interest rate and cost to you, may be lower than other options. However, your assets are at risk should you be unable to pay the loan back. Increasingly I’m seeing business owners communicate that they want to separate their business lending from their property or other personal assets. Typically they also want to avoid borrowing from the lenders that hold their residential mortgages (likely the Big Banks!). As such, it’s best to utilise a trusted finance broker to help find the best deal for your individual circumstances.
Wishing you the best for your week in business.
Jason Smith