Home – New Forums Money matters Applying For A Loan (Ineligible?)

  • This topic is empty.
Viewing 13 posts - 1 through 13 (of 13 total)
  • Author
    Posts
  • #983194
    GSanders12
    Member
    • Total posts: 201
    Up
    0
    ::

    Hi guys, hypothetically speaking:

    A new company (no employees, simply subcontracting all of the work) with $50,000 a month in revenue, wants to receive a loan of $50,000 to pay for expenses.

    The company owner has no credit rating at all but has a business with income. Is it possible to put that business with income on the line as a security for the $50,000 loan? This company owner also has no financial income for the past 2 years.

    Thoughts? If this loan is not eligible at all, are there any other alternatives without giving up a chunk of your company to a Venture Capitalist for example?

    Thank you

    #1141070
    MyGreatIdea
    Member
    • Total posts: 2,278
    Up
    0
    ::

    NAB offer a Micro Business Loan which I was told about at the recent HomeBiz Connect expo.

    My understanding is:

    You submit a plan showing how the money is to be used. There is no collateral required. If approved, you are issued with a credit card to the approved limit. You must only use the card for the items included in your plan. You must submit invoices and receipts to NAB as you go.

    So basically it’s like a personal loan for your business for a specific purpose. You’ll need to check the details, but this is the way it was explained to me.

    Wendy :)

    #1141071
    Past-Member
    Member
    • Total posts: 1,815
    Up
    0
    ::

    I looked up Wendy’s suggestion for NAB and the information is good. Here is the link http://www.nab.com.au/wps/wcm/connect/nab/nab/home/About_Us/7/4/3/2/

    My first business loan in 1987 was at 13.5%* so I think the NAB one is very reasonable. (I remember our mortgage in 1978 went up to 17.5% by 1979. Rates have certainly changed.)

    #1141072
    Lindz
    Member
    • Total posts: 254
    Up
    0
    ::
    KarenC, post: 161136 wrote:
    My first business loan in 1987 was at 13.5%* so I think the NAB one is very reasonable. (I remember our mortgage in 1978 went up to 17.5% by 1979. Rates have certainly changed.)

    Ah, yes. The good ol’ days. And there was no guarantee, then or now, that rates weren’t about to rise further.

    You really needed to know that your business was going to make a good gross profit before you borrowed at those kinds of rates.

    And while the rates have changed, the basic rules haven’t. It’s not really about monthly revenue or interest rate levels, it’s about profit levels and ensuring that you will be able to pay what you owe and still have a little left over to buy food.:p

    All best,

    Lindsay

    #1141073
    WhatsThePlanDan
    Participant
    • Total posts: 297
    Up
    0
    ::

    Looks like you might be in for a tough battle there – I know I had to fight hard to get the finance for my first business (and I had a house to use as collateral too as well as a wife with a regular income). Unfortunately I am still trying to pay that one back even though I don’t have the business anymore (maybe the bank knew something I didn’t… :rolleyes:)

    Your best bet is to make sure you have a rock solid business plan developed and build a good relationship with a business banker (the only way I got my loan was for the business banker to go into battle for me).

    You could look at Angel Investing. That low an amount the VCs probably won’t look at you but an Angel Investor might. Again you will need to have a rock solid business plan in place (with lots of evidence to back up your assumptions). The upside would be that you would then have someone that is presumably very experienced in business to hold your hand and give you guidance and advice along the way (could end up being worth more than the money they give you!).

    Personally I am not keen on borrowing anymore unless I really have to. I’m fighting hard to avoid it with the new business – but it does mean we have to work much harder and smarter (a good thing! :D) and also means we have to keep jobs for a while longer (a not so good thing :().

    Good luck with it. One last piece of advice – make sure you know exactly how much you need to borrow as a worst case scenario. Don’t fall into the trap I did of borrowing the lowest amount possible (best case scenario) and then finding you don’t have enough to keep the doors open because things didn’t go as well as you hoped.

    Cheers
    Daniel

    #1141074
    GSanders12
    Member
    • Total posts: 201
    Up
    0
    ::

    Unfortunately I’m not eligible for a business loan but I was told to do an overdraft. Can business banking overdrafts be significantly high? I can’t get a NAB loan because it seems to low at 15,000 for my situation. I will definitely look into Angel Investors. Im sure they would provide great experience too!

    Thanks for the advice everyone!

    #1141075
    LucasArthur
    Participant
    • Total posts: 3,171
    Up
    0
    ::

    Oh boy, finance and the hurdles it entails..

    The harshness first and foremost.. Banks will lend to businesses/individuals that they deem worthwhile risks.. and when i say risks, there aren’t many taken at all by the banks so it really needs to be a sound proposition, especially unsecured.

    They assess:
    a. individual personal standing (who are you, what is your past finances like, what is your current personal balance sheet, can you show savings at all or any assets)
    b. then the bsuiness (what is it, how long been in business, who are you customers, where are you situated a home or an office, what are your overheads, what is the risk of the industry, what if your clients dont pay you can you afford the repayment and the list goes on)

    then they also want to see:
    c. business plans
    d. personal docs such as PAYG/Tax Assessments – to see serviceability should the business go belly up
    d. contracts in place with your clients that you suggest pay $50k per month

    My suggestion would be to sit with a Business Banker in an institution (NAB/CBA/ANZ/WBC/etc) that you already work with personally and chat about your query… Get some advice before proceeding from those that know the current GFC situation and where banks are currently hedging their money as this shifts from quarter to quarter…

    Its imperative you speak to a person that would potentially be your next contact should you proceed as the advice received by the incorrect person could be catastrophic to not only the process but also your inner drive…. 😮

    If your personal situation is bleek with low assets, poor income over the last 2 years (proven by tax returns), bad debt, etc etc it will be fairly hard to get across the line with your business revolving purely around sub contractors… As the strength of your business is relying on 2 parties really, your customer and your sub contractor which can be 2 individual battles if either goes sour…

    Most importantly,, BANKS WANT TO SEE HURT MONEY.. money you have already invested into your business… They always ask themselves, ‘why would we lend them money to run their business if they haven’t even put any money in’.. what level of HURT is in it if the business goes sour? if all the risk is on the bank, this can be unfavourable as well…

    Please don’t see my message as a NO YOU CANT DO IT.. its a message of, anything can be done with the right mix and presentation… Its a matter of IF the right mix is there for the banks to take a risk ‘WITH YOU’..

    Good luck, love to hear how you go.

    Cheers
    Jason ;)

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1141076
    Cjay
    Member
    • Total posts: 183
    Up
    0
    ::

    If the business is taking in 50k per month, why not build up cash reserves to fund without debt?

    The scenario you’re talking about is quite difficult and doesn’t quite stack up against the proposed income coming in.

    #1141077
    GSanders12
    Member
    • Total posts: 201
    Up
    0
    ::

    Hi guys! Thanks for the valuable advice everyone as it is really helpful in getting to know how it all works. I see my options as the following:

    *Apply for many loans (NAB, ANZ, CBA, ETC)
    *Use a credit card limit with my first personal credit card & business card.

    I am getting in contact with a couple banks & will see how they can help me. I want to put the business on the line as a security when it has income coming in. Once I get the loan I can put it to good use and expand my operations. I think I will need to combine my credit card limit with my revenue that I will be getting for the first few months. That is only if a bank won’t lend to me.

    ANZ seems keen on helping new small businesses AND young entrepreneurs starting up so hopefully I can get something good out of that! Their pledge to loan 1B for the next 12 months is also quite promising. Hopefully NBA or ANZ will accept me.

    Any of you guys have experience with funding your start-ups with credit cards at the beginning? I am wondering what my first card limit will be as my banker had told me they combine your personal credit card with your business card in a way if you don’t have a credit rating & want a business loan. Overdrafts.. credit cards.. bank loans.. cash reserves.. etc. Worst comes to worst, angel investing here I come!

    In response to building cash reserves, the thing is that I would need the money right away.

    The real situation: I would be making $20,000 a month in revenue & require a $50,000 loan for a marketing project that will take me to $50,000 a month in revenue.

    #1141078
    Peter Jonsson
    Member
    • Total posts: 10
    Up
    0
    ::

    As per the previous posts, start up finance is hard but not impossible. You are going to need a detailed business plan backed up by good financial forecasts. With your forecasts ensure you can articulate how you have come up with the numbers. All the banks have business plan and financial forecast templates on their websites. If you do not progress far with the banks have a look at what Government grants you might be eligible for, there are different grants for different States and businesses – however these take some time to establish.

    If you have to resort to using your credit card, plan your cash flow carefully as you want to ensure the interest costs you will be paying are worth it. Only use your credit card as a short term option until you build up your cash reserves as credit cards will be your most expensive funding.

    Good luck, I hope you have some success.

    Peter

    http://www.peterjonsson.com.au

    #1141079
    GSanders12
    Member
    • Total posts: 201
    Up
    0
    ::

    Thank you. I am going to develop a cash flow forecast & business plan template that I have gotten from a bank’s site before I go to meet. Cheers!

    #1141080
    onestop
    Member
    • Total posts: 15
    Up
    0
    ::
    GSanders12, post: 161085 wrote:
    Hi guys, hypothetically speaking:

    A new company (no employees, simply subcontracting all of the work) with $50,000 a month in revenue, wants to receive a loan of $50,000 to pay for expenses.

    The company owner has no credit rating at all but has a business with income. Is it possible to put that business with income on the line as a security for the $50,000 loan? This company owner also has no financial income for the past 2 years.

    Thoughts? If this loan is not eligible at all, are there any other alternatives without giving up a chunk of your company to a Venture Capitalist for example?

    Thank you

    There may be some options. I deal with business finance so if you are interested in having a chat give me a call 1300 125 226. The big question here is how long have you had the business for?

    #1141081
    onestop
    Member
    • Total posts: 15
    Up
    0
    ::
    GSanders12, post: 161085 wrote:
    Hi guys, hypothetically speaking:

    A new company (no employees, simply subcontracting all of the work) with $50,000 a month in revenue, wants to receive a loan of $50,000 to pay for expenses.

    The company owner has no credit rating at all but has a business with income. Is it possible to put that business with income on the line as a security for the $50,000 loan? This company owner also has no financial income for the past 2 years.

    Thoughts? If this loan is not eligible at all, are there any other alternatives without giving up a chunk of your company to a Venture Capitalist for example?

    Thank you

    If you are prepared to take a smaller amount I may be able to assist with a line of credit. Give me a call on 1300 125 226 if interested in chatting about your options.

Viewing 13 posts - 1 through 13 (of 13 total)
  • You must be logged in to reply to this topic.