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  • #967519
    ThomasAJ
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    Most organizations require property as surety and some the equivalent in cash via a term deposit. We own property but it is highly geared as it is for investment purposes so they will not accept.

    They will accept say $100k placed in a term deposit for a $100k overdraft. Makes no sense to me from the customers viewpoint. eg earn say $6000 pa, pay $2000 tax. Then on overdraft pay anything up to $15000 if fully drawn – sure it’s tax deductible but still one is way down net $s.

    So does anyone know a LOT about small business fianance OR can direct me to someone who knows a lot – am happy to pay for advice – is there a forum that specializes in small businees finance or posibbly a commercial website.

    Ta

    Tom

    #1026781
    ThomasAJ
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    Um…not much happening here for experienced business people…newbies only?

    Please some someone just make a comment about finance or direct me to some more appropriate forum.

    Thanks

    Tom

    #1026782
    BB
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    Hi Tom,

    No – we’re not all ‘newbies’ here but it’s hard to make comment or offer some help if we don’t have all the information.

    From what you’ve posted – are you looking for a loan? or Perhaps you’re looking to invest some money? or are you just wanting some taxation advice?

    Also, not knowing where you live or what you do makes it difficult to be of much assistance. There are different laws in different states and countries, and different industries also have some quirky rules when it comes to money matters.

    So you see – we’re not ignoring you…. we just don’t know how we can help. In the outset – a financial advisor might be of assistance, as might a finance broker or even a bank. A good accountant could also be valuable.

    You’ll also find that in Australia, many good financial advisors will be loathe to give you personal advice via a forum (that could come back to bite them).

    However, a bit more information from you, and I’m sure there’ll be somebody willing to point you in the right direction.

    Kind regards

    B.B.

    #1026783
    Anonymous
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    Hi Tom,

    Sorry that no-one’s stepped up to advise you yet. As BB mentioned (thanks BB!), more information would be helpful. There are actually several people around here who might be able to assist or to point you in the right direction, but they’ll need more details before they can advise you.

    All the best – hope it comes together soon,
    Jayne

    #1026784
    ThomasAJ
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    • Total posts: 17
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    Hi and thanks for the comments.

    Looking for a loan to expand a business interstate to QLD. Business has been operating for 7 years, profitable (ie good enough wage to owner – about $90k last 2 years each). Up to $100k required for office setup and 1 staff plus odds and ends untill earning income after initial 6 months or so.

    Business has no debt, gross income of $330k. Went to 2 banks (WP and NAB) and both said serviceability no problem but no money without surety of property or cash. Have business plan, cashflow forecast, office and staff in VIC that will do a lot of the work for QLD.

    It’s all set to go from every angle. Totally confident of the businees working in QLD as started it from nought in VIC so know what we are doing.

    #1026785
    James Millar
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    Hi Tom.

    The short answer is that no bank will provide unsecured debt finance for more than about $20k (probably booked as a personal loan) to a micro business like yours. As you note – a term deposit for security of an equivalent overdraft is a joke (for some reason the banks actually think its a small business finance solution).

    You will need to self fund unfortunately (which may mean you need to remodel the budget).

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1026786
    ThomasAJ
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    JamesMillar, post: 31850 wrote:
    Hi Tom.

    The short answer is that no bank will provide unsecured debt finance for more than about $20k (probably booked as a personal loan) to a micro business like yours. As you note – a term deposit for security of an equivalent overdraft is a joke (for some reason the banks actually think its a small business finance solution).

    You will need to self fund unfortunately (which may mean you need to remodel the budget).

    Thanks James

    Any other sources at all – happy to pay higher rates to cover the ‘risk’.

    #1026787
    MikeF
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    Hi Tom

    The situation with lending to small businesses is that most lenders in this space require some sort of security as you have already found out. So when a business needs to expand one of the areas that is often not properly considered is it’s existing balance sheet.

    By balance sheet I mean some times business owners do not consider its biggest asset. It’s existing customers ie your trade debtors.

    If your existing business has unpaid invoices these can in most circumstances be used to provide security to lenders such as invoice discounters to provide funds in advance of their normal collection period.

    Invoice discounters (also called debtor finance) can at times provide an efficient means of extracting cash from within a business to meet everyday business expenses or to allow businesses the freedom to grow.

    Also if funds are required to purchase assets/stock etc then you may need to also look at hire purchase and leasing.

    My suggestion is to look to breakdown the amounts required to fund your business expansion amongst a number of different lenders depending on where they may be comfortable. eg

    – your exisiting bank (ie small overdraft)
    – your existing trade debtors (if any)
    – asset finance
    – unsecured credit (ie credit cards)

    Last resort…family/friends. Personally I’d leave this one alone.

    Good luck

    #1026788
    ThomasAJ
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    Many thanks all.

    Having the proven history plus the future plan (almost 100% guaranteed of success- don’t forget they say serviceability is not an issue- No, I know these 2 statements are not realated) – I am wondering if anyone knows why the major financial institutions view us as a risk they do not want to be involved in.

    They would charge about 15% on the overdraft.

    I know for instance ANZ bankrolled KIKKI (sorry the rest escapes me at the moment – the Sewdish concept stationery garbage) so they do fund kooky startup businesses.

    Surely they just don’t say no 100% of the time – I just cannot believe this to be true.

    #1026789
    MikeF
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    ThomasAJ, post: 32145 wrote:
    Many thanks all.

    Having the proven history plus the future plan (almost 100% guaranteed of success- don’t forget they say serviceability is not an issue- No, I know these 2 statements are not realated) – I am wondering if anyone knows why the major financial institutions view us as a risk they do not want to be involved in.

    They would charge about 15% on the overdraft.

    I know for instance ANZ bankrolled KIKKI (sorry the rest escapes me at the moment – the Sewdish concept stationery garbage) so they do fund kooky startup businesses.

    Surely they just don’t say no 100% of the time – I just cannot believe this to be true.

    Tom

    The issue with the major lenders is that they see SME’s as high risk due to the high number that fail to exist after 5 years.

    Banks do not see themselves as equity participants (ie one of your shareholders unless you have a successful multi million dollar business and a compelling competitive advantage).

    I don’t know much about the KIKKI story but I’m guessing the bank has funded them under their franchise funding arrangement which accredits only strong franchise systems that have at least 5 years successful track record.

    Alternatively the owner/s may have had to sell out equity wise having obtained funding through a private equity placement which some of the banks were pushing big time before the GFC.

    Having been involved with lending to SME’s for over 20 years the banks will always want it both ways when it comes to their assessment of the perceived credit risks by their Credit Depts.

    #1026790
    BruceR
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    MikeF, post: 31974 wrote:
    Invoice discounters (also called debtor finance) can at times provide an efficient means of extracting cash from within a business to meet everyday business expenses or to allow businesses the freedom to grow.

    To expand on the suggestion above. Receivables financing is becoming more popular nowadays (a progression from old style factoring where you ‘sold’ your debtor book to a bank). The bank can take your debtors/receivables ledger as the security and lend you 70-90% of the value immediately. You are still responsible for collecting the debts, and once the money is received (generally into a separate ‘locked’ bank account) the balance is payable to you – for a fee/interest of course!

    Obviously this is most applicable to an established business with a good track record for receivables (ie good credit control and management of payment terms).

    Could be an option…..

    #1026791
    ThomasAJ
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    Thanks all again – much appreciated.

    #1026792
    rbyrne
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    Hi Thomas,

    I am involved in Invoice Discounting (debtor finance) and may possibly be able to help. We can buy one or more invoices from a business as and when needed – it is not the cheapest form of finance but may provide a solution if more flexible cashflow is required. Have a look at the website and give me a call for a chat if you like –

    cheers
    Roger Byrne
    Interface Financial Group
    Tel 0414 892 854
    Fax (02) 8088 7157
    Email: [email protected]
    Web: http://www.interfacefinancial.com/byrne

    #1026793
    Kirsten B
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    You’ve clearly given a lot of thought to funding your growth plans through debt, but have you considered funding growth through an equity raising?

    Perhaps offering key staff the chance to purchase equity in the Queensland operations may be viable, or trying to connect with ‘business angels’ that could help out in exchange for equity?

    Other possibilities may be a joint venture with a key stakeholder such as a supplier, or franchising.

    Would using a serviced office rather than a long-term lease help? Or temp/agency staff to start with?

    Of course, these might not be suitable to your business but I thought that I would throw the ideas out there.

    #1026794
    ThomasAJ
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    Thanks all…again.

    Can’t do debtor finance as no debtors.

    Balance sheet seems the go.

    Interestingly (maybe) a friend of mine obtained a $120k loan in 2001 with no property as surety, no experience in the business he was going into, and all NAB wanted was a Fixed and Floating over the new company he registered.

    I know credit has changed since then – but I still find it amazing.

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