Apply for a business loan
Whether you are starting a new business or expanding an existing business, there are two options for financing - equity and debt. Karen McGregor (Debt financing has distinct advantages because its cost is low relative to equity, it does not ask for ownership of your business and the interest is tax deductible.
Debt has some clear benefits and financial institutions will seek to ensure that they understand how the funds will be used and that the business has the capacity to repay the facility. So it is important to be prepared when you meet your relationship manager at the bank.
The best way to show why you might need to make an application for finance is through your business plan, especially if you are starting a new business. A business plan will also show how you will spend the funds and what you expect the sales, profit and ability to repay the loan will be.
Your business plan should also demonstrate the outlook for the market, an understanding of your competitors and their strategy and the outlook for your industry. Market research will be an important activity to complete as part of your business plan as it will demonstrate your understanding of demand and supply for your product or service, and how you intend to attract customers to purchase your product or service.
It would be also worth going over your business plan with your accountant to check your forecasts and assumptions. If you don?t have a board of directors it would also be worth running over your business plan with a trusted business friend or colleague so that you are sure you have addressed all necessary issues.
If you have an existing business, bring along your current financial statements, copies of your bank statements and details on existing debt and bank facilities.
The other important thing to think about before meeting with the bank is the form of security you will provide. Security is generally sought in the form of property (residential or commercial); however, banks may also consider cashflow of the business depending on the industry, the quality of the established business and the level of debt relative to the value of the business. It is best to contact the bank to ask about cashflow lending before your meeting and ask what information they require.
It is important to remember that debt financing comes in a number of forms. These include working capital such as overdrafts and receivables financing, trade finance such as letters of credit, long term financing such as term loans and bills and equipment finance such as leasing. In your discussion with the bank, it is worth going through this list to identify the best method for financing your new or existing business opportunity.
It is also worth asking the bank if they have product solutions or ?Packages? designed for your industry. In the retail and apparel industry cashflow can be lumpy and therefore at different times of the year it will be important to have access to funds while at other times have the ability to make repayments to your loan but retain access to those funds in the future.
Starting, running and managing a small business is very demanding, however, there are a number great places for more information. The Federal Government?s Business Entry Point web site www.business.gov.au provides information on building business plans. If you?re looking for an accountant, visit www.icaa.org.au or www.cpaaustralia.com.au. The Commonwealth Bank also provides a guide for small business at business.commbank.com.au which contains links to these and many other sources of information on business lending and other financial solutions.