Small Business Finance Options
Are you thinking of buying assets, for example property, equipment, or inventory? Or do you want to boost your current market using advertising and marketing, or perhaps develop into new market areas?
No matter what you are doing, be crystal clear about your goals and objectives.
One thing to do once you begin looking into small business finance would be to carefully examine what you are aiming to accomplish. Having specific goals and objectives is one of many fundamental rules of achieving success in running a business.
Whenever a small business is trying to get financing, their first choice is generally the bank.
Three Small Business Finance Alternatives
Yet there are times a bank loan is not the smartest choice. Your bank may not be willing to grant a loan, or maybe not wanting to lend until the owner agrees to put up their house as collateral, or perhaps the small business owner is just not comfortable signing up for a bank loan.
To clear the air and open a few eyes to the options available, here are 3 financing alternatives that might suit your business.
Leasing and Hire Purchase
If it’s equipment that your business needs capital for, then consider leasing instead of purchasing outright. Avoiding the large capital outlay of buying equipment outright means there’s no need to take on a burdensome loan and smooths the cash payments over a more manageable and predictable cycle.
Of course there are significant accounting differences and lease terms to consider too, so it’s important to discuss the decision and implications of leasing with your financial adviser, but it can be a very cash flow efficient way of financing equipment so it’s well worth a look.
Most businesses issue invoices on 30 day terms, which means it might be up to 60 days before they actually see the cash in their account. All the while bills keep rolling in and staff still needs to be paid.
Debtor financing is one way to overcome this by providing a flexible line of credit based on outstanding invoices. The cost is usually an interest rate charged on the borrowed balance and in return the bank will allow a business to access up to 90% of the value of their outstanding invoices.
When large businesses want to raise money they can sell shares on the Australian Stock Exchange. A similar option is available to small to medium enterprises through the Australian Small Scale Offerings Board (ASSOB). The board matches entrepreneurs and business owners seeking growth capital with investors.
Businesses can raise up to $5 million on the ASSOB through the issue of an offer document, which has fewer of the onerous regulatory requirements of an ASX capital raising. The board also offers a marketplace for the sale of the shares.
Small business finance is not difficult to obtain when you pitch effectively and your organization is continuing to move forward and has specific goals and objectives in place to achieve success.
The best thing for you to do is carry out some financial housekeeping before you begin looking for outside funding. Having your record keeping and financial situation up to date and addressing any finance problems well before you look for funding gives you a far better prospect of achieving success.