Financing your dream business does not need to be a stressful and troublesome experience. Thanks to the online revolution, there are more options than ever before for time-poor small business owners. Here are a few tips.
Choosing finance - what are the options?
There are many finance options available. Here are four main sources for business funding:
- Unsecured Business Loan
This is an increasingly popular option for small businesses as unsecured loans, like those offered by Prospa, do not require collateral – there’s no need to place your house or other personal assets as security to obtain the funds. Most importantly, applications can be completed quickly and simply online with funds usually available within 24 hours.
- Bank Loan
Traditional bank loans generally require filling out vast quantities of forms and pledging security, such as your home, in return for a secured loan. Banks prefer established businesses with regular cash flow. Bank loans often take time to be approved and small business owners are generally in need of funds quickly. There is also the added risk of losing your house if the business goes bad.
- Invoice Finance
This is a popular option whereby small businesses use invoices they have issued as security to obtain a loan, effectively passing on the role of debt collection to a third party to free up cash flow. The downside to this is the potential to send a negative message to your customers if a third party chases up payment of the outstanding invoices.
- Friends and family
Borrowing money from friends and family members is an option, but one that could change the nature of the relationship. As a lender, a friend or family member may feel they have a say in how you run your business. On the other hand, you could risk harming the relationship if business goes bad and you’re unable to repay the debt.
An unsecured business loan through a non-bank lender, such as Prospa, is a fast and seamless way to finance your business. The amount you can borrow is not dependent on the value of the assets provided but rather based on business performance. This enables you to establish a good credit record by making timely payments.
Tips for getting a loan
Before applying, give yourself the best chance of success by first checking your credit report, getting all your documentation together and preparing a business plan that clarifies how you plan to use the funds and ensure repayment.
Traditional lenders typically require such information as a business plan, profit and loss, cash flow forecast and risk analysis, as well as bank and tax records going back one or more years. They will also want an asset as security, such as your house, car or other equipment, in case your business fails.
However, if you do not like chasing up paperwork and do not want to pledge your house as security, online lenders, such as Prospa, offer a simpler alternative. For amounts under $50,000, all that is needed is your driver’s licence, business ABN and the BSB and account number of your main trading account. Applications can be completed online in just a few minutes. Most loans are approved within 24 hours and funds are usually available the next business day. So, dream big and seize every business opportunity that comes your way. With a Prospa small business loan, you can.
- Analysis: Employer/employee divide constraining growth
By Adam Zuchetti
- Helping employees back to work after illness or injury
By Adam Zuchetti
- 7 steps to engaging business leadership
By Adam Zuchetti