Small and medium enterprises endure many challenges from day to day. From inception, SME founders must translate the vision and the mission into actionable plans. These efforts require unity of purpose, the correct allocation of human resources, equipment, machinery, and capital to each functional department within the organization. Throughout it all, cash flow is needed to grease the proverbial wheels of the SMEs operations. A business without cash flow is moribund. Therein lies the greatest challenge for entrepreneurs and their nascent operations.
The Traditional Route for Financing
In the land down under, there is the talk of at least 2 interest rate hikes in 2018. If these predictions come to pass, it will make the cost of borrowing more expensive. According to ABS housing finance data, the average mortgage in New South Wales is $456,100. If interest rates rise, repayments will rise from $2,535 all the way up to $2,666, on the assumption that there is a 4.5% interest rate applied to the repayments. Whether it’s mortgages, personal loans, or business loans, rates will rise across the board.
Small businesses face challenges around the world. Central banks are embarking upon an aggressive policy of monetary tightening. This gained momentum in the US in December 2015, and has now spread to Canada, the United Kingdom, Australia and beyond. Rising interest rates are typically associated with rising inflation, even though rising interest rates are designed to counter inflationary pressures. It is incumbent upon borrowers to ensure that they can make the repayments without unnecessarily stressing their finances. This holds true for SMEs across the board.
Unfortunately, Australian banks and banks across the world have tightened up their lending requirements. The bureaucratic red tape that is typically associated with business loans is even more stringent today than it was before the global crisis of 2008/2009. Banks want to see hard data, business plans, and tax returns before they are willing to consider issuing business loans, bridge financing, or other lines of credit. There are wide-ranging interest rates on personal and business loans, ranging from 3.39% on the low end upwards of 5.23%. If possible, small businesses should attempt to lock in low-interest rates before the RBA hikes the bank rate.
What viable options are there for small business loans?
The credit markets are a hive of activity. Besides Main Street banks and financial institutions, there are a plethora of payday loan lenders, short-term lenders, and others. Short-term lenders should really be avoided as the interest rates associated with these loans are extortionary. It is not uncommon for short-term loans to be associated with interest rates significantly higher than the prevailing bank rate. Plus, the convoluted terms and conditions associated with short-term lenders are none too small business friendly. The best way to approach the credit markets is by comparative shopping. This can be a time intensive process, although there are high-quality comparative shopping sites where SMEs can pick and choose their preferred lenders.
SmallBusinessLoansAustralia’s reviews feature objective assessments of multiple alternative lenders. It is geared towards sourcing affordable small business loans to Australian companies. These companies include prospa, sail, Spotcap, Lending Express, and Capify. The qualification requirements for these small business loans are much more business friendly than banks. Clients can typically receive funding in the region of $5,000 – $400,000, depending on the lender in question. Unlike banks, applications can be answered in as little as 2 days, and very few documents are required to gauge a client’s eligibility. More importantly, these companies offer unsecured business loans to clients. Any legitimate business generating more than $10,000 per month can qualify for generous small business loans from leading providers. Since they are not banks, approval percentages are much higher, and many of them have overwhelmingly positive assessments on objective review sites.
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