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Jun 2015

The Australian Loan Landscape for 2015 and Beyond

June 20, 2015
Capify Australia

Back in 2013, a large group of business owners launched the Small Businesses – Too Big to Ignore campaign in the hope of drawing attention to the needs of business owners for sources of funding.

This was taken as a means to bridge the gap between company initiatives and the costs required, and eventually foster economic growth. After all, investments not only create employment and income, but also influence a spike in a nation’s GNP through growth and innovation.

Calls Heeded 


Since then, Australia has heeded this call. Not only has the government funded and backed small and medium-enterprise funding, even private entities have also opened their vaults, so to speak, and provided small enterprises easier access to additional or start-up funds.

In fact, the past year has posted many milestones in the Australian economic landscape. The Bureau of Statistics recently reported a massive rise in commercial finance from the previous year. This increase is driven by housing loans and leasing loans – but also, and more importantly, any personal finance and business loans.

Game changing financing products 


Perhaps this recent rise of creditors not traditionally preferred may be attributed to the way financing, investing, and lending institutions have revolutionised the industry. These entities have created several loan programs that provide a ready source for small business owners in need of financial help or at least the financial freedom to bolster their operations.

Today, business owners are not limited to choosing between personal and fixed-term loans, both having distinct disadvantages: the former usually covers low-amount loans while the latter often requires mortgage and assets as collateral.

Now, business owners may opt for specialised financing products, say, equipment loans – financial options that are similar to car loans and make use of business equipment as collateral. Such a deal gives proprietors the opportunity to jump start the operations even without the huge amount of cash usually needed for capitalisation. This is crucial for equipment-heavy industries, such as manufacturing, food processing and restaurant businesses, as they deal with a large volume of equipment and supplies on a daily basis.

Another option that is growing in popularity across the SMB sector are the unsecured business loans, which require no collaterals or prior credit history as a prerequisite for approval. A business owner only needs to have a bank account from where the financing company can draw payments daily. Approval only takes a few days – a consideration that most start-ups have.

Yet another is the merchant cash advance, which is similar to unsecured business loans except that it draws the daily payments as a percentage of the daily credit card sales. The implication of this is enormous – the business owner does not have to worry about huge monthly amortisation payments, which are often the cause of creditors defaulting on their loans and eventually closing shop. There is less pressure, and the lending companies consider a client’s financial performance in collecting the dues.

Joining the Fray 


All said, the near future looks bright for business owners. The business landscape has never looked better! On one hand, there is a growing market both locally and abroad; the need for various products and services are self-evident. On the other are lending institutions willing to impart their resources to fund projects and the “next-big-things.”

Of course, the excitement from this whole enchilada can also lend itself to disadvantages. Business owners and prospective proprietors may jump into any of the financing options without a clear and working understanding of each, and the relative advantages and disadvantages in comparison with one another. It is often quoted that knowledge is half the battle, and without this, the excited business owner may find themselves in the midst of a problem requiring the balance of cash flow with financial obligations.

Still the benefits greatly outweigh the risks, and this danger may be mitigated or even avoided with proper research and preparation. It is necessary that the business owner carefully studies each option and considers what best suits their business. Choosing the institution is equally as important.

A wise proprietor should choose a company with years of history in the industry, more so one that goes the extra mile to provide ease and efficient access to funds. The most reliable institutions are mindful enough to explain the best possible options for funding and the ones that perfectly address a company’s needs.

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