Whether you’re starting out in a new business venture or have an established business ready for growth, giving your business a solid financial grounding can be the difference between success and failure.
Every small business is unique and has different financial requirements and often the injection of finance can provide growth and cost saving opportunities.
There are many business loan options so knowing which one is right for your business can be tricky without an experienced mortgage broker to guide you through.
Business lending is a more complex process than residential mortgages, so it’s essential you give your business the best opportunity at approval. Mint Equity has extensive experience in business finance and commercial lending and we understand the nuances of lender’s credit and policy.
Why use Mint Equity for your business loan?
Business loans are more complex than a standard home loan, so it’s important that you engage a specialist mortgage broker like Mint Equity to secure the most favourable outcome for your business.
We have extensive experience in business finance and our services are free of charge as we’re remunerated by the lender you choose.
Business loans are classified as a high risk profile from a lending capacity, so Mint Equity takes a detailed and solution based approach to preparing your loan application. We’ll look at all the options for you to start or take your business to the next level. Thinking outside the box has provided our clients with new opportunities to improve their lifestyle and business diversification.
How are business loans different to a standard mortgage?
Lending criteria with the banks around business finance can be more difficult to secure partly due to the increased risks inherent with business. Whether the business loan is for start-up, capital or investment in stock or equipment, lenders will want to be reassured of your past and future performance. Banks will look at the performance of the business along with associated Directors to see if you are stable and can display past good credit.
What are the types of business finance?
New business finance
Starting your own business is a dream for many Australians, but without the right financial backing it can be doomed from the beginning.
Once you’ve prepared your business plan and you know the operating costs of the business, you’ll be able to identify how much cash you’ll need for your business loan.
Many lenders will offer funding for start-up businesses, but some are more generous and flexible than others, so it pays to have a good mortgage broker in your corner.
If you’re purchasing a franchise model, some lenders look at these business acquisitions more favourably, however it does depend on the franchise you are purchasing. From a lender’s perspective there is less risk lending for a McDonald’s franchise purchase because it is a proven business model with high revenue.
One of the benefits of working with Mint Equity to source your business finance is that we know which lenders have an appetite for start-up or franchise business finance. Gone are the days of donning your best suit and walking in to see the Bank Manager to propose a new business venture. Now it’s incredibly important to talk to the right people before applying to avoid disappointment.
Finance to grow your business
Whether it be purchasing new equipment, cash flow for employee growth or moving to larger premises there are many finance options for businesses to get set for growth.
You may also have an opportunity to grab more market share by buying a competitor. We recently secured finance for a client to purchase a major competitor by borrowing 147% of the value of his home. Watch this 1 minute video to learn more about how we did it.
Finance to purchase an office, factory or warehouse
If your business has outgrown its current premises and rather than rent your next office, factory or warehouse, you may prefer to purchase a commercial property in your business.
Commercial property purchases are slightly different to a normal residential purchase from a lending perspective. Commercial property has a higher risk profile so interest rates are usually higher and often the lender will require a larger deposit, sometimes up to 30% or 40%.
This is where Mint Equity as a business loan broker stands out from the crowd, as we’re experienced with more complex lending applications involving companies, trusts and SMSFs. Read our article on Limited Recourse Borrowing in an SMSF to learn more.
If your business has reached its capacity with the existing equipment or assets, purchasing additional equipment can increase your revenue.
There are many options for equipment finance including an equipment loan, finance lease, hire purchase or equipment rental. Each option has their own nuances, benefits and disadvantages so Mint Equity can take you through the options and discuss what suits your business best.
Cash flow finance
An overdraft facility is access to additional funds from the lender to use when you need additional cash flow. Usually they are connected to your business transactional account with a set limit. Once you start utilising the funds, you incur interest costs. Once you pay it back you stop being charged interest.
Overdraft facilities are often the choice for businesses where there may be a delay in payments that only impact your cashflow in the short term.
Depending on the lender and company position, securing an overdraft facility can be relatively straightforward and in certain situations can be secured by a Director’s Guarantee.
Similar to an overdraft facility, invoice financing is a short term small business loan solution but rather than having a set limit on your transactional business account, the finance is provided once you make a sale. This can be a suitable option for businesses who deal with clients with slow payment terms or government based contracts.
Often this type of solution can be found through external vendors however they aren’t a great long term solution as they will only lend a percentage of the invoice amount upfront and charge interest and fees for the service.
If you’re considering invoice financing for your small business, speak with Mint Equity before you do as there may be more cost effective small business loans for you cash flow issues.
How to get a business loan
Before you apply for a business loan you need to make sure you have a viable business. The best way to get your great idea out of your head and onto paper is by preparing a business plan. A detailed business plan will form the outline of the business purpose, risks and strategy to ensure the business is a profitable entity.
A key area of the business plan is around your operational costs and acquisition of business sales. These are some of the areas a lender will look at to see if a business loan is an appropriate risk to the lender. Essentially, the lender won’t provide a business loan to a business that is unlikely to be able to repay it.
A lender will also look to see if you have ‘skin in the game’. You might have cash savings that you are going to put into the business or an asset that you can provide as security.
Once you’ve completed your business plan, give Mint Equity a call to discuss your needs and we’ll be able to advise what finance options are available to you.
Franchise business loans
Before buying you’ll need to do your homework on the franchise, but don’t worry as there are industry associations ready to support you.
The key to a successful franchise venture is doing your due diligence on the franchise, the costs, fees and revenue opportunity as well as assessing the lifestyle commitments you’ll need to make.
A bank or lender is going to do similar research when you apply for the business loan so it’s important you are fully informed. More importantly, the type of franchise will have an impact on the level of funds you can borrow, so it’s always best to talk to Mint Equity prior to purchase.
Franchises can cost anywhere between $20,000 and $1,000,000 – so sourcing the right finance and interest rate will have a big impact on your business.
While you’re doing your due diligence, give Mint Equity a call so discuss what options are available for the franchise you’re interested in.
Secured or unsecured business loans
Business loans can be ‘secured’ by various types of assets (eg property) or ‘unsecured’ (no assets provided). Generally unsecured business loans attract a higher interest rate than a secured business loan. Remember though, the lender has the legal right to seize any property or asset you offer as security if you can't repay a loan on time.
Read our article Does your business need finance? What you need to know about business loans to learn more.
What are the interest rates for business finance?
Interest rates varied depending on the type of business loan. For example an overdraft facility interest rate is usually around 14% to 16%pa whereas fit-out finance for an office could be around 5% to 7%pa. The interest rate will depend on the purpose for the finance.
Business loan features
There are loads of options for your business loan to suit your changing needs;
- Fixed and variable interest rates
- Interest only loans
- Principal and interest loans
- Combination of principal and interest or interest-only
- Pay monthly, quarterly, half yearly or annually
- Redraw if you're ahead of your scheduled repayments on a variable rate loan