Before you seek finance, carefully consider the following questions with a qualified accountant or business advisor…
Business finances | Assess your financial needs
Most businesses seek finance to improve cash flow or replace machinery or equipment of some kind. While there are many other reasons why a healthy business will seek finance, for some it may flag underlying financial problems. Before you seek finance, carefully consider the following questions with a qualified accountant or business advisor:
- What does your business need?
- Why are you seeking finance?
- Should you be seeking finance?
- What finance options are available?
- Which finance options are best suited to your situation?
- Do you have the ability to repay the finance?
Reasons for finance
To help you get started, below are a number of common reasons for seeking finance as well as some finance options available:
Cash flow fluctuations
Although cash flow is one of the most common reasons businesses seek finance, you should carefully analyse your cash flow before considering finance. This will ensure the fluctuations are not caused by poor cash flow management. Some of the finance options include:
- Overdraft facility
- Line of credit
- Fully drawn advance
- Invoice financing
- Loan/cash flow lending
- Trade credit from suppliers
- Credit card (caution should be taken with credit cards and they should be used to fund very short-term working capital needs.)
Depending on your business situation, you may require property for a shop front, factory, or to house inventory. It’s useful to consider whether a purchase or a lease would better suit your business before you decide on finance. Some finance options include:
Whether you need one vehicle or a whole fleet, there are a number of finance options available. Before you choose a finance option, it’s also useful to decide whether a purchase or a lease would better suit your business. Some finance options include:
Machinery, equipment and tools
There are a number of finance options available to purchase or replace machinery or equipment. However, before you decide it’s useful to investigate whether a purchase or lease would better suit your business. Some finance options include:
You may require finance for the purchase of inventory if it needs to be paid upfront or has an extended delivery date. If your inventory is for resale, it might be worth asking larger clients to pay a deposit to help alleviate your finances. Some finance options include:
Starting your business
Whether you’re starting a business from scratch or purchasing an existing business or franchise, there are a number of finance options available. Some finance options include:
- Fully drawn advance
- Venture capital
- Private investors such as business angels
- Crowd funding
- Own funding
Please note: Investors such as business angels and venture capitalists may expect some level of self funding/existing equity in the business before investing.
Growing your business
Obtaining finance can help you grow your business through improving goods or services, diversifying, expanding or franchising your business. Some finance options include:
Another way of growing your business is by exporting overseas. As well as traditional sources of finance, there are also a number of government options available. Some finance options include:
- Venture capital
- The Export Finance and Insurance Corporation offers bonds, finance and guarantees to help exporters declined by other lenders.
- Government grants
Research & development
As well as traditional sources of finance there are also a number of government options available. Some finance options include:
A need for finance can sometimes come from mounting debt or trying to survive during tough times. Before you consider further debt in this situation, consider first improving your financial position. Some of your options include:
- Government grants available for disaster-affected businesses.
- Free legal advice in your area.
- Financial counselling services .
- Personal counselling services.
Once you have done all you can, talk to investors or a lender about finance options to improve your situation.
What to do…
- Visit our Investigate finance options page for details about the financing options listed above.
- Find out what finance options are best for you on the Business Loan Finder tool, available on the Business Victoria website.
- Search our Grants & Assistance Finder for details about government grants, incentives and other funding programs available for businesses.
- For a list of financial counsellors near you, visit the Insolvency and Trustee Service Australia (ITSA) website.
- If you’re unable to make your current repayments with a lender, find out your rights and the steps you should take on the Financial Ombudsman Service website.
- Seek finance in your state or territory.
- Visit the MoneySmart website for personal financial advice, free legal advice and counselling services.
- Consult a finance professional or financial institution for assistance with financing your business.