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  • #990391
    Arrowandheart
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    Afternoon all,

    I have got to the part of getting my business off the ground and need to get some funds.

    I require around 20k to get my business started I have completed a business plan and I’m wondering what I should go to the bank for a loan or a credit card?

    Any help and advise on securing finance would be appreciated.

    Regards,

    #1176705
    Cash Flow is King
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    Arrowandheart, post: 205783 wrote:
    Afternoon all,

    I have got to the part of getting my business off the ground and need to get some funds.

    I require around 20k to get my business started I have completed a business plan and I’m wondering what I should go to the bank for a loan or a credit card?

    Any help and advise on securing finance would be appreciated.

    Regards,

    A bank loan for $20k is pretty easy to get if you have a business plan, and equity in a house to back it up. Interest rate would be around 6% – 7% annually. A credit card wouldn’t need the property as a security, but is harder to get $20k without a track record, and is going to cost you about 20% per year. Sounds to me like you need a good SME finance broker who can work with you to get he best deal.

    #1176706
    iaindooley
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    Have you checked out NEIS? There’s a lot of paper work to get through but a few people I know have gotten circa $20k to cover start up costs out of it.

    #1176707
    NickKaro
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    iaindooley, post: 205916 wrote:
    Have you checked out NEIS? There’s a lot of paper work to get through but a few people I know have gotten circa $20k to cover start up costs out of it.

    I could be wrong but my understanding was that NEIS was similar to Newstart, i.e. paid fortnightly, subject to similar requirements except the business took the place of job seeking?

    #1176708
    LucasArthur
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    Honestly,

    Am not sure about the replies to the OP and I apologise although there is far from enough info to adequately provide a decent response. It’s all speculative! Does he have equity? Does he have money? Does he have a job? The list goes on.

    Personally OP, my advice is 2 fold. On the one hand, and considering its 20k, I would suggest you discuss your options with the accountant you should have already aligned yourself with and on the other would be to speak to a bank or broker so you can divulge more detail in order to acquire what can and can’t be done.

    Wishing you all the best

    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1176709
    onestop
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    Arrowandheart, post: 205783 wrote:
    Afternoon all,

    I have got to the part of getting my business off the ground and need to get some funds.

    I require around 20k to get my business started I have completed a business plan and I’m wondering what I should go to the bank for a loan or a credit card?

    Any help and advise on securing finance would be appreciated.

    Regards,

    It is pretty tough to get such a small loan for a startup business as a Business Loan. There are some lenders that will consider you outside of the mainstream lenders for a business loan of this size but you will require security in the form of real estate. Some will consider cars as security as well.

    If you do not have real estate security it would be recommended if you are currently working to try for a personal loan. However bear in mind there is no guarantee you will obtain all the funds you require as these are unsecured and lenders will decide the amount lent based on risk.

    A credit card can be a good option for a startup but depending on your financial position you may not get the full credit limit you require in one hit.

    Bear in mind every loan application you do (including credit card applications) will be marked on your credit file and will be seen as a negative. It would be in your best interests to consult with a loans professional first to assist you in making the correct decision for your situation.

    All the best.
    Katherine

    #1176710
    MH08
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    Interested to know what kind of business requires that much capital to start up?

    #1176711
    JustinHyde
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    Unfortunately the sad reality is getting finance for a startup is not typically going to happen without some sort of security. Unless you’ve got the next Google or something where you can attract angel investors or seed capital from sophisticated high net worth individuals (who will want a share in the business, obviously), your options are limited. Even businesses that have been trading successfully for a few years tend to struggle to get bank finance.

    Personally, I’d tend to approach friends or family if you can’t get a personal loan or secured finance. Good luck!

    #1176713
    Arrowandheart
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    Thanks everyone for your help we are looking to go down the line of a personal loan after talking to our accountant and a business broker.

    😎

    #1176714
    LucasArthur
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    Arrowandheart, post: 207306 wrote:
    Thanks everyone for your help we are looking to go down the line of a personal loan after talking to our accountant and a business broker.

    😎

    Awesome you have a plan in place now :)

    It is interesting that you state you are going for a personal loan after speaking with an accountant and a business broker (assuming finance) as ‘personal’ loans are meant to be used for personal purposes.. If you get a personal loan for a business start up, most lenders will steer clear of you as they do not approve of personal loans for commercial applications – in any way.

    The only time you tend to hear people being approved of a personal loan for business lending is if they are going through a broker and the broker is not divulging that the intended personal loan is to be used for commercial reasons. This tends to be seen as deceitful.

    Please, take note that i am not trying to oppose your decision i am merely wanting to make you completely aware that this is unusual and if the broker is (and not saying he/she is) intending on applying under false pretences that if the institution that finally lends you funds hears of this the recourse can be quite substantial. Especially since whatever the broker (or a broker) tells you and states in the application, you are underwriting it as true and correct and the recourse on the broker is quite minimal.

    Maybe just ask a few further questions, or even approach a bank for your own curiosity and ask the business lender about a loan and if you can apply for a personal loan to fund your project just to hear them out :)

    Let us know how it all pans out.

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1176716
    ThexArm
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    When I was reading Jason’s reply I was just thinking why would the lender cares how the money is being used as long as their repayments are paid regularly. Personal loans are to be used for personal reasons. Be it a overseas trip, wedding or buying a car or whatever. If the lender is not satisfied with the applicant that he may not be able to pay back ( ex. No supporting income or no supporting guarantee or no supporting assets) then they won’t approve in first place. As long as he has got the approval and got the money they he can use it on the project.

    I do agree that it’s a big risk to use personal loan to fund their project if they don’t have a regular income.

    #1176717
    LucasArthur
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    ThexArm, post: 207349 wrote:
    When I was reading Jason’s reply I was just thinking why would the lender cares how the money is being used as long as their repayments are paid regularly. Personal loans are to be used for personal reasons. Be it a overseas trip, wedding or buying a car or whatever. If the lender is not satisfied with the applicant that he may not be able to pay back ( ex. No supporting income or no supporting guarantee or no supporting assets) then they won’t approve in first place. As long as he has got the approval and got the money they he can use it on the project.

    I do agree that it’s a big risk to use personal loan to fund their project if they don’t have a regular income.

    Howdy

    Just want to re-iterate that i am not 100% sure although there is a clear delineation in lending from the major institutions between ‘personal’ and ‘commercial’ lending with each have their own merits of assessment and criteria.

    Although it is not clearly spoken about on websites and other application processes, you tend to find the moment you advise it is for ‘commercial’ lending and that the funds are being applied for to ‘fund’ a business the tone of the application shifts immediately. Reason, the loan is NO LONGER being used for ‘personal’ reasons (other than, i want a business which is not personal lending) and is clearly being used for ‘commercial’ interests.

    Being an Accountant, i am sure the two variables are clear? (not picking here so my apologies)…

    If you apply for a personal loan for say, as the banks web sites tend to infer, a boat or a car or a holiday or to consolidate personal loans and so forth your assessment is based on simple eligibility criteria that tends to circle around the following:
    – Be at least 18 yo
    – Currently residing in Australia
    – Have regular income
    – Have good credit rating
    – And a minimum requirement – this varies although tends to be $5k +

    as opposed to borrowing for commercial applications which tend to require:
    – Be at least 18 y/o (as guarantor)
    – Be Australian Based
    – Have documented history of profit, strong balance sheets and projected cash flow based on last few years of trading
    – Have good Credit Rating
    – Executed Directors Indemnities for the loan
    – Directors of good standing, both credit rating, personal balance sheet etc
    – Used for commercial purposes

    The reason that banks tend to do the clear delineation is that the assessments are very different as you can tell from the above. Lets say that someone is applying for a personal loan for starting a business this would circumvent the eligibility criteria of commercial lending as the business that is to repay the loan (which is obvious that this is the intent as its being used to create said business) is not being assessed and the merits of the repayment schedule have been completely overlooked other than a personal assessment. The entire picture is not being disclosed to the bank about the business and therefore near impossible for a Bank to make an evaluated decision on the loan based on ALL FACTS as not all facts have been disclosed (p/l, cash flows, etc are not be looked at)…

    I know its long winded reply, and apologies, although i originally replied to the post so the the OP could make an evaluated decision on how this moves forward and to just clarify the comments from the broker to ensure they are not misleading the institution in any way by not disclosing everything. Because if this occurs there can be rather large repercussions.

    It may all pan out that the broker knows a bank that has more lenient processes for applying for a personal loan, although i personally doubt this.

    Again, just to summarise banks have 2 clear channels within their marketing space and one is Personal Banking and the other is Business/Commercial Banking. If they did not differentiate between a Personal Loan and a Business/Commercial Loan why is there 2 clearly different faces to the Big 4 Pillar Corporations that exist?

    Anyways, as i elude to sometimes i have a lil experience in this area and have seen many things tweaked to benefit the applicant and none turn out well when things go wrong (if they go wrong)…

    Cheers
    Jason

    ps.. as a side note… and i am not a residential lending expert.. i even hear that if you have a residential mortgage and for some reason your financial circumstances change, you are obligated to advise the bank in which the loan is held of this change otherwise you are technically in breach of your loan :(.. MMM, does anyone do this? when you change jobs? when you take maternity leave? when you have lunch and so forth..

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1176718
    audreygreenwood
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    When you have a sound business plan, you will be able to secure a loan from the bank with a collateral to support it.

    #1176719
    1911naomi
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    Hey, I work at a major bank, currently maternity leave, if you asked me for a personal loan for business purpose I would have to say no. Personal Loan for personal purpose not business

    #1176720
    Hobidi Bob
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    Hey guys,

    completely understand what you guys are saying but, once you have the money from a personal loan you can do with it as pleased. What I am saying is, go for a personal loan for a car and a holiday say $30,000. These are the personal reasons for the loan. However you then decide instead of a $20,000 car and $10,000 holiday you buy a $5,000 car and spend $1,000 on a weekend away.

    I have done for a $16,000 loan to buy a $12,000 car and used the rest as seen fit.

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