By: Olly Guilleaume
EOFY has come and gone. How’s your cash flow looking?
The rush and pressure felt by many businesses at the end of the financial year have come and gone. Now that the smoke from EOFY has cleared, you can take a considered approach to setting business objectives and planning expenditures for the year ahead.
Maybe this is the year you expand, start an advertising campaign or hire temporary staff for your busiest season. Perhaps you want to be ready for unexpected expenses or get ahead of tax debt. Even the most successful businesses can find themselves in need of assistance with inventory financing or cash flow.
There are a few things to keep in mind as you prepare to apply for a small business loan at the outset of a new financial year.
4 tips to kickstart the financial year with a small business loan
Tip #1: Plan ahead to offset this year’s tax debt
Perhaps you were able to find the money to take advantage of EOFY sales, to make business purchases that are eligible for deductions to offset this past year’s taxes. If not, remember – appropriate purchases in the new financial year will also be eligible for tax deductions. In fact, now that the EOFY period has passed, time is once again on your side.
Do your due diligence and comparison shop for the products and services you need for your business. Ensure you’re making purchases that are legitimately tax deductible, and compare potential lenders that can provide the cashflow assistance you require.
Don’t wait until October to make your decisions, because tax debt can negatively impact loan eligibility.
Tip #2: Prioritise loan applications before tax returns
It’s never too early for tax planning, especially if you are expecting tax debt. And of course you want your tax return to be submitted on time. However it is critical to understand that once you have a tax debt on the books, lending options for small businesses become more limited and many banks will turn you away. If you’re going to be seeking a loan for any number of reasons to support your business this year, the trick is to get that loan before your taxes are due.
Or you can opt for a short-term, small business loan to cover your tax debt, so you are in a good credit position to enable you apply for longer term, larger-scale financial support for your business.
Do reconcile past tax debt, obtain the loan you need, then submit your tax return, if at all possible.
Don’t despair if you’ve already submitted your return and incurred a tax debt, or have a tax debt balance. You still have some options.
Tip #3: Understand your small business loan options
When thinking about a business loan, many people turn to their banks. Although banks may offer competitive rates, they have requirements that can be tough for sole proprietors, start-ups and small business owners to meet, such as:
- Time-in business: In most cases, the business must have been trading for at least two years.
- Comprehensive documentation: You’ll need to provide financial statements, tax returns, balance sheets etc.
- Collateral: You may be asked to secure the loan with high value items such as machinery, a car or a house.
- Credit: You’ll need a good credit history and zero tax debt.
If that’s not going to work for you there are alternatives, such as reputable and responsible online and short-term lenders.
Do get yourself organised, investigate your options and perhaps get advice from a lender or broker with small business expertise. Take stock of the status of your business, what documentation you can pull together and any equity you may bring to the table. Identify your particular needs.
Don’t forget that there are a small number of alternative lenders that offer solutions for small businesses that have outstanding tax debt, even when a business owner cannot provide a home or commercial property as collateral.
Tip #4: Find a lender that will listen
You’ll need to compare lenders, products and options and look for a lender that’s right for you. Certainly you’ll want to find an experienced lender that specialises in small businesses and has designed loan options that solve the problems that small business owners typically face.
Perhaps you’ll want to find a lender that supports business clients that have been operating for less than the two years that banks typically require. You might also need a lender that accepts fewer documents and doesn’t require collateral.
Online application forms are great, and you definitely want a quick turnaround on the approval decision as well as quick access to the funds you need. But if the online form is backed by an algorithm that says “No” much more often than it says “Yes”, you may not get the outcome you’re looking for.
If you have a lower credit score, need an unsecured loan and have outstanding tax debt, our top tip is to find a lender that will actually listen.
Do work with a lender that lets you talk to a real loan officer who will take the time to understand your situation and your potential to pay back the loan in good time.
Don’t believe the naysayers. Yes, it can be tough for small businesses to find funding, but there are lenders out there that offer personalised service, assess each application on a case by case basis and help small businesses realise their goals.
Olly Guilleaume is the National Manager for Limba, one of Australia’s most experienced small business lenders.
Limba supports small businesses with fast, convenient business loans between $5000 – $100,000 for term lengths between 3-24 months, and flexible repayment schedules. As a lender with a 20 year history operating in a niche market, Limba believes small businesses deserve friendly service, prompt decisions and individual attention built on a foundation of strong ethics and that’s what they deliver. Limba also works closely with its suite of experienced finance brokers and referral partners, to help small businesses troubleshoot financial challenges.