Monthly Archives: July 2018

Unsecured Business Loans Melbourne: Definition, Perks and Disadvantages

What is an unsecured business loan?

In general 2 types of loans are available at present, secured as well as unsecured. By the term “unsecured business loan” we refer to a type of loan which is not secured against any asset including cash, property or equipment. It does not entail any collateral and is solely based on the business borrower’s creditworthiness.

How it helps businesses

In case you do not possess any asset or have been in business only for a short span of time, it is highly probable that you won’t be lent money by your bank. Unsecured business loans can prove to be extremely beneficial in such cases. This type of loan is suited to businesses, preferably the new ones that do not own any asset or prefer to repay a loan by using the business health.

Unsecured business loans can prove to be helpful for small businesses on certain critical occasions and can help the business to prosper faster. Below we will take a look at how it is going to help businesses in general.

1. In their previous days, small businesses had an inclination to avoid getting any unsecured loan because of concerns regarding falling into a debt trap. However, this is not the case at present and in the contemporary rapidly developing global economy there are lots of opportunities available for the small companies to explore with enhanced confidence. It is possible for them to obtain additional funds so as to market their products as well as services by maintaining a decent cash flow position. They can also add new inventory, employ more staff and expand their premises. Unsecured business loans provide these businesses with the required edge to invest in a prudent manner thus helping them to prosper faster.

2. Another significant benefit of procuring unsecured business loans is the comparatively fast and hassle-free approval procedure. At present, business opportunities can come and go and it is imperative for any company to tap them at the proper moment. Consequently, a small business must not devote much time in filling up lengthy loan application forms which they should utilize for something more fruitful. It is possible to apply for an unsecured loan either online or through any mobile application. Moreover, all the essential documents including bank statements, tax statements, previous loan statements, business invoices and so on can be uploaded on the web.

3. A variety of unsecured business loans is also available for different business requirements. Small businesses which have been operating for the last several years and possess sound business financials will be able to apply for unsecured business loans. Although a nominal fee might be charged, there is usually no pre-closure penalty. Moreover, an unsecured loan can be repaid within a short period of time thus making it very easy for small businesses to properly plan their budgets.

Benefits of unsecured business loans:

1. No collateral

As compared to the secured loans, an unsecured business loan does not entail any collateral so as to qualify for financing. Consequently, in case you are not able to repay the loan on time, your home is not going to be seized by the lender along with your other personal assets.

2. Get cash faster

It is very simple to obtain unsecured business loans and therefore you can easily get the money faster. You need not spend must time for appraising the value of your assets and properties since collateral is not a part of the equation. Usually, a borrower will get his cash within only a few days although he might be required to make a legal promise to repay that loan.

3. Credit score not much of a factor

In case your business revenue potential is strong but you suffer from poor credit, it will still be possible for you to become approved for an unsecured loan. However, this will depend significantly on the particular lender.

Cons of unsecured business loans:

1. Higher expenses

Higher rates will be charged by the lenders since a borrower will be eligible for obtaining unsecured loan depending on his business revenue strength as well as credit score and not the assessed value of his assets.

2. Higher monthly payments

The majority of the unsecured business loans are available for shorter terms implying that the funds must be paid earlier. Moreover, interest rates tend to be higher for these types of loans.

3. No tax exemption

As compared to the secured loans, interest on an unsecured loan isn’t tax deductible.

Unsecured Business Loan Interest Rates

The interest rates for unsecured business loans are calculated on risk. In other words, it is actually lending based on risk. In fact, a business with a higher risk will require you to pay a higher rate of interest as compared to a business having a solid flow of cash as well as an experience of trading for quite some time.

Alternative forms of finance:

In case your business is suffering from poor credit and has limited financial history, an alternative to unsecured business loans will be obtaining a business cash advance. It will offer the following benefits:

1. No collateral required

2. Poor credit will not matter

3. Flexible repayment facilities

Companies/Businesses offering unsecured business loans:

  • Prospa, established in 2011
  • Capify, established in 2002
  • Spotcap, established in 2015

Trade Finance For Melbourne Businesses: Definition, Perks and Disadvantages

Trade Finance Definition:

In Australia, trade finance is a type of loan that provides funding to an exporter, before the importer’s goods are shipped over from the foreign country. Typically, the collateral for these loans are the items in transit.

Additionally, most of these cash advances are short-term in nature and meant to facilitate the immediate purchase of certain goods. They are usually paid off upon reselling of those items in the local marketplace. If you own a business in Australia, you can get trade financing from either banks or credit unions which have a variety of financing options to suit your needs. Apart from the loan, some of them may also provide you with financial advice, foreign transaction technologies and even analytics.

How trade finance is helpful to entrepreneurs and what businesses can benefit:

Oftentimes, doing international business can cause cash-flow problems especially for budding entrepreneurs. Many Australian business owners face impediments regularly when it comes to embarking on global projects, or export ventures. Nevertheless, with trade finance you’ll be able to settle payments with your exporter in good time, so as to manage shipment of items within the expected time frame. Furthermore, financing can be tailored to suit your company’s size and business transaction cycle, which can last anywhere from 7 to 180 days.

Generally, trade financing is suitable for import and export businesses that deal with both perishable and non-perishable products. While the loan offers an immediate line-of-credit for working capital, it also comes with various letter of credit options that permit the financier to act as a 3rd party in your global transactions.

Pros:

  • Reduces the risk of going bankrupt. Without trade finance, you may encounter late payments from debtors, excess stock, bad debts and demanding creditors that can have negative effects on your small business. Since trade financing is a form of revolving credit, you can ease the pressure of doing international business and prevent your SME from going under due to financial constraints.
  • Opportunity for greater profit margins. The loan allows you to buy items in bulk or high volume up front, thus generating more returns due to economies of scale and strengthening your relationship with exporters.
  • Improved efficiency and productivity. By working with other global players in trade, you’ll be able to enhance and diversify your supplier network and this shall ultimately create efficiency in your markets and supply chains.

Cons:

  • Exporter payments are not guaranteed in cases where there’s political instability, or the risk of fluctuating exchange rates.
  • In most cases, lenders don’t assume responsibility for transfer risks and won’t be held liable for the items that you receive.
  • Getting a trade finance may cost you a little bit more than a direct bank loan, especially in cases where the amount of goods being shipped is minimal.

Interest rate & fees charged:

Generally, the amount of interest you’ll pay depends on the value of trade finance that you have taken. Additionally, different financiers will have their own unique rates which you should check out before choosing any particular trade finance company. Nevertheless, the average interest rate for trade finance in Australia is 3.80pct. Some financiers can provide loans totaling up to $400k, with flexible repayment patterns lasting between 30, 90 and 180 days.

Alternative sources of finance:

While trade finance is the most popular source of funding for Australian importers, there are still other ways that one can get loan for their small business. They include:

Specialist financiers. These are lenders that invest in a particular industry and have keen interest in it, for instance, there are institutions that only provide funding for agricultural-product importers due to their belief in promoting global agro-economy.

Angel investors. Typically, these are experienced business people looking for opportunities to employ their skills and finances to a business-idea that they believe in, so as to earn good returns for their investment.

Australian companies that offer trade finance:

ANZ

ANZ is a reputable trade & supply chain solutions provider that offers affordable methods of funding your working capital and cash flows. They also have the necessary technology to administer your trade finance transactions, and promote growth in overseas markets for your business.

Scottish pacific

Founded in 1988, Scottish Pacific is one of the largest providers of trade finance in Australia, providing business people with a wide variety of both trade and debtor finance facilities. They have 3 funding offerings which include; tradeline, import finance and export finance.

Merchant Cash

Merchant Cash provides Australian importers with a great opportunity for getting working capital or cashflow, without requiring any collateral. In addition to providing purchase-order finance, they also offer Debtor Finance and Inventory Finance to help with extra cashflow and help maintain sustainable growth.

In conclusion, trade finance can provide sufficient cash flow for businesses operating in the import & export industry, which can help them purchase supplies in good time and enhance their profits.

Business Overdrafts Melbourne: Definition, Perks and Disadvantages

All you need to know about business overdrafts

What is a business overdraft?

A business overdraft is a line of credit that provides relief and helps to cover some of the unexpected expenses. The credit is often activated when you make a withdrawal larger than your account balance in the business debit account. Think of this kind of loan as a safety net that covers you when your business runs out of cash to cover its expenses.

In essence, this means you can continue withdrawing from your business account even when it’s empty, which gives you flexibility in your cash flow. This kind of credit can allow you to pay your employees on time even when your clients have delayed paying. Of course, your business must repay what you spend, just like a business loan or credit card. Interest is usually charged based on the amount of credit your business has used.

A business overdraft usually comes with a limit, which works more like a credit card limit. Financial institutions are currently offering a minimum credit amount of about $1,000 up to a whopping $10 million maximum credit limit. But you don’t want your business paying a hefty interest on a $10 million debt unless you really need it.

An overdraft credit can be unsecured or secured. You can use business property or assets as security when advancing a secured overdraft. If you advance a secured overdraft for your business, the financial institution can sell the property or asset your business used as security to recover their dues if you don’t repay in time.

When applying for a business overdraft, most lenders require that you show a solid and stable business turnover, have equity in a property that you can use to secure your loan and in some cases, demonstrate a legit business need for the loan. Most financial institutions will issue unsecured overdrafts of up to $100,000. If you need more, the lender will most likely need some security to secure the extra credit.

Examples of how a business can use a business overdraft

Seasonal businesses: If your business makes most of its income in a certain season of the year but requires some credit to settle its running expenses, an overdraft can come in handy before the next season peaks. For instance, a retail business that makes a bulk of its income during the Christmas season can use an overdraft to settle salaries and expenses during lower seasons.

Setting up a company: You can use an overdraft to help cover supplier and staffing costs during your initial launch phase before the business starts earning income.

Long-term contracts: if your business has a long-term contract and needs to pay to cover its expenses before completing, a business overdraft can help. This is common with construction companies which are paid a bulk of their income after project completion –they can use an overdraft to pay for materials and staff during construction.

Client default: if a major client in your business defaults on payment, you can use an overdraft to pay for your operating costs until your cash flow stabilizes.

Pros and cons of a business overdraft

Pros:

  • An overdraft can offer your business with a flexible line of credit
  • A bank overdraft is easy to arrange
  • Your business is only charged when you actually use the overdraft facility
  • Having an overdraft provision provides a piece of mind
  • You can apply for the business overdraft at any time

Cons:

  • Overdraft interest rates are typically higher than those of standard business loans
  • Interest rates for most lenders are variable
  • Exceeding agreed overdraft limit may attract hefty penalties
  • You need to have a solid, active current business account
  • Your lending institution may withdraw the overdraft facility at any time –always check the terms.

What Charges and fees Apply?

Application fee: there is usually no application fee, but some institution tend to charge for it

Account-keeping fees: this is an ongoing fee that goes towards managing the overdraft facility. But again, this is not common

Interest rate: this is charged on the overdraft credit your business spends. They vary among lenders but typically range between 5% and 12%.

Over-limit fee: this is a penalty for the amount withdrawn exceeding the overdraft credit limit.

Establishment fee: This is a fee charged during the setup of an overdraft facility. It’s usually negotiated between financial institution bases in the nature and terms of the overdraft.

Business overdraft alternatives

Merchant cash advances: this is a good alternative to overdrafts if your business accepts payment using credit card machines. They are more like loans but are specially pegged in your future card sales.

Revolving credit facilities: this closely resembles the bank overdraft since your business receives a pre-approved credit limit. This is however not tied to your bank account and you can decide which account should be used when you apply for the overdraft.

Invoice finance: if your business gets paid in terms of invoice finance, your lender can advance you a percentage of the face value of your invoice earlier so that you don’t have to wait.

Example of institutions offering business overdrafts

Some of the most notable business overdraft facility providers in Australia include;

  • Suncorp-Metway Ltd
  • Australia and New Zealand Banking Group Limited (ANZ)
  • Bank Australia Limited
  • Moula
  • Commonwealth Bank of Australia (Bankwest)

Guide To Car Loan Options For Melbourne Businesses

Getting vehicle finance for your business is generally not difficult. Most car dealers are satisfied with a cash deposit and a reasonable credit score. As a business owner, there are a couple of factors you might have to consider when making the decision to apply for vehicle finance.

Consider that as part of your company’s production or value chain, you company car is not a luxury item, but an investment that will be part of your business’ assets. It’s financing, insuring and other costs will have an impact on your company’s finances.

There are a number of car loan options available for businesses and it is important to choose the right one for your business to avoid any headaches.

The first thing you need to do is decide the kind of financing you need. You need to be clear about the kind of car you need and what you will be using it for. Some car loan options allow you to borrow or lease a vehicle without ever owning it whilst others allow you to own the car outright. These options have their own unique advantages and disadvantages, read on to find out what is available out there and find the option that is right for you.

Business Car Finance Options

Business car loans

You can apply for a business car loan if you want to buy a car in your name or under your business name. You will be required to make fixed monthly payments over a specific period. When applying for this type of loan you may be required to provide proof that your finances are strong enough. If you have business partners, a personal guarantee might also be required from each of the owners. You can get car loans for your business from your bank, credit unions or from online lenders. Business car loans usually require a 10 to 20% deposit.

Pros:

– An outright purchase means you can drive the car out of the lot.

– You are able to select or negotiate the terms of your finance, the deposit and the interest.

– You have the freedom to pay extra to reduce the loan term or interest.

Cons:

– An outright business car loan can be a direct drain on your business capital.

– You need to ensure adequate cash flow for maintenance, repairs and upgrades to meet changing conditions.

– Cars depreciate in value which makes them a poor long-term investment.

Commercial Hire Purchase

Under a commercial hire purchase option a lender will buy the car on you behalf. You as the business owner hires the car back from the lender at a weekly or monthly rate. When all the repayments have been made, including balloon payments, the car title can then be transferred to you making you the legal owner of the car. Terms range between 1 and 5 years.

Pros:

– Monthly repayments are less than conventional business car loan payments.

– No down-payment required and you pay less in sales tax because you are not actually buying the car.

– You get to own the car after the hire purchase period ends.

Cons:

– You don’t really own the car so if you default, the lender might be quick to repossess.

– The lender will also insist on insurance and might even prescribe his own preferred insurance company.

– That ‘balloon’ payment means that you may pay much more in the end when you take ownership of the car.

Car Leasing

Leasing a vehicle allows you to use a car without really ever owning it. What happens in this case is that the lender buys the car on your behalf and leases it to you. You will be required to make monthly lease payments until the lease period lapses. When you reach the end of your lease period you can decide to either pay the remaining value of the car and take ownership, refinance the lease or trade the car in for a new one. This option does not usually require a deposit or down payment.

Pros:

– You can arrange a lease without a down payment.

– Warranties often last the length of the lease which means you won’t have to worry about maintenance bills.

– The key benefit of getting into a leasing arrangement is the fact that the cost of the car can be written off as a business expense which means tax savings for you.

Cons:

– You don’t have as much freedom as you would have if you bought the car from the beginning. The lender/dealer may charge you extra for going over the mileage limit.

– The lender may also demand that you take a particular kind of insurance.

– It will cost you a great deal if you break the lease before the lease period ends.

Chattel Mortgage

A Chattel business loan is one type of business loan used by Australian businesses to finance their business cars. With this type of car loan a lender provides the funds for a car or fleet. The business owner pays the loan and the interest. This option is different from hire purchase and leasing in that the business owner becomes the car owner from the outset.

Pros:

– You own the car

– Contract terms are often flexible

– Lower interest rates

Cons:

– Unlike the lease option, payments aren’t fully tax deductible.

– You take on all responsibilities of owning a car like getting insurance and maintenance fees.

Alternative Car Loan Options

Commercial line of credit

Do you need more than one car for your business? Some businesses require a fleet of cars like truck or vans. You can build your fleet by getting a commercial line of credit from a lender. You won’t have to spend a lot of time and effort getting approved for individual vehicles, but can get financing for multiple vehicles at the same time. To qualify for this you will need to have strong credit and be able to prove that you have consistently high revenues.

Heavy-duty truck financing

Heavy-duty vehicles like trucks are often hard to finance. There aren’t a lot of lenders who specialise in this, but if you are in the trucking business and you are looking to build a fleet, the would be a good option to consider. Most lenders require your business to be at least two years old and to have strong credit and high revenue.

Personal loans

A personal loan can be used for a number of reasons including buying a car for your business. This is a great option if you want to buy a car mostly for your personal use than for business. Personal loans have higher interest rates than a lot of the business car loan options out there so, treat it as a last resort.

Mortgage Redraw

You could refinance your mortgage to finance the purchase of your car. This is ideal for homeowners who are ahead with their mortgage payments. If your home holds enough equity, you can set up a secondary loan against it. Just make sure you stick to the purpose of the loan and not mess with your home mortgage.

Business Car Loan Providers

There are a number of lenders in Australia that offer business loans to finance cars. The three best providers that you can try are:

Stratton Finance

Stratton Finance has been providing car loans for a range of vehicles to meet different needs for over 25 years. It is one of Australia’s largest car finance brokers because of its partnership with Carsales network. You can get loan amounts of up to $100,000 at the fixed interest rate of 5.29% This offers you the certainty of knowing what you’ll be paying every month. The loan term is 1-7 years. You can trade the car back and use it as a deposit on a new car.

Bank Australia

Bank Australia offers competitive rates on car loan. You can get finance on a fixed interest rate of 6.45 % per annum on a 7-year loan. There are no limits as loans are evaluated on an individual basis. You can make extra payments to pay your loan off quicker with no additional costs. You can finance that business vehicle you need or begin building the fleet you need for your business.

BusinessLoans.com.au

BusinessLoans.com.au is the easiest way you can access a business loan to finance your car. You can apply online for loans ranging from $5,000 to $250,000 payable over a 2 to 5-year term. You can choose to take balloon payments and you can aso repay your loan early. There are a number of options that you can choose from to meet you particular need like a specialised truck and trailer loan.

The bottom line is that there are many options that are available to businesses looking for car loans. It is important to evaluate your situation and be realistic about what you can afford. You may get the best deal or have to make concessions to get that much needed vehicle or fleet for your business. There are a couple of financial institutions that can help you access the finance you need. Do your homework properly and you will find the option that will work for you.

Truck and Trailer Finance Melbourne: Definition, Perks and Disadvantages

Truck and Trailer Finance Options

Are you looking for truck and trailer finance options? If you reside or own a small business in Australia you are in luck! Trailer and truck finance options can help you purchase a new or old truck or trailer. The advantage of this option is that you can have the deal brokered in just a matter of hours or in a day. Additionally, you will be dealing with a financier who is conversant with truck and trailer finance. This will ensure that the deal you get is tailored to suit your unique needs.

Truck and trailer finance is suited for anyone who owns a small business. Whether you need to buy a refridgerated trailer for a grocery business, or you need a livestock trailer, this type of finance is your best bet. The finance also covers other types of trucks and trailers, including semi trailers, side lift trailers, and even low loader trailers. This type of financing is also suitable for business owners in the mining, construction, transport and earthmoving industries.

Benefits of Truck and Trailer Finance

1. Quick Loan Access

Unlike other financing options, using a truck and trailer finance is more convenient. If you need financing urgently, you can be assured of it in a matter of hours. Most companies will avail the finance to you within 24 hours.

2. Less Paperwork

For anyone looking for a stress-free loan option to purchase their truck or trailer, they can also avoid a lot of formalities and paperwork. Most of the time, all you need is an ACN or ABN, and a certain minimum amount of money in monthly sales to show that you can repay the loan. You may also be required to have been in business for a certain period, usually at least for 6 months.

3. Flexible Repayment Options

The other benefit of truck and trailer finance is that it comes with a flexible repayment plan. The good news is that you can always discuss your financial situation with your lender and they will help you work out a payment plan that suits your individual needs. This flexibility may not be enjoyed with other finance options.

Cons of Truck and Trailer Finance

1. High Interest Rates

If you get a truck and trailer finance from a lender, including a bank, you may have to pay high interest loans. However, this will depend on the lender. The rate may be high because you are a new customer, and you do not have a financial history with the lender.

2. Third Party Dealings

Some truck and trailer financiers will involve third parties, such as a local car dealer. Such dealings may mean more formalities for the customer. To avoid these inconveniences, some business owners prefer getting financing directly from the truck and trailer dealers.

3. Expenses

Some truck and trailer finance options come with conditions. Some financier will require you to enter into a prior lease before buying the truck or trailer of your choice. While a lease may be cheaper than buying your truck immediately, if extended over a period of time, you may end up incurring more charges than you had initially anticipated.

Charges and Interests

Most truck and trailer finance companies in Australia will offer their customers funding between $5 000 and $ 250 000 or above. While some companies may not charge customers fees for using their financing facilities, some charge a small fee. The interest rates on the truck or trailer finance may also vary depending on the company you settle for. Some may have rates as low as 4 -5% while others may start from 7-12%. Some lenders’ rates may even exceed 12%. The rates usually depend on the amount borrowed, as well as the timeframe for repayment. While some have a fixed interest rate on an annual basis, some may have a variable rate over a number of years.

Alternative Forms of Truck Finance

As a business owner, you can finance your truck or trailer purchase using other modes of financing. These include online lending, crowdfunding, angel investors as well as grants. These will work well if you have a also a start-up or a small business.

Companies that Offer Truck and Trailer Financing in Australia

  1. BusinessLoans.com.au
  2. Heavy Vehicle Finance
  3. PACCAR Financing
  4. Savvy
  5. Finance Ezi

Hire Purchase Melbourne: Definition, Perks and Disadvantages

What You Need to Know About Hire Purchase

Also known as corporate hire purchase or commercial hire purchase, hire purchase refers to an arrangement whereby customers agree to a contract so as to acquire assets by settling an initial installment and repaying the balance of the price of the assets plus interest over an agreed period of time. It’s a credit agreement that is used to buy motorhomes, caravans, cars, motorcycles as well as other financial assets.

Basically, before considering any finance firm offering hire purchase terms, it is essential you perform a little bit of fact- finding. Be assured that experimentation will assist you be able to distinguish between a legitimate finance company from a fake one. Courtesy of research, you will be in a position also to secure reliable finance companies that will not only assure you with very satisfactory terms of service but affordable quotes as well.

Businesses Suited to Getting Hire Purchase

The system is considered appropriate to be used by small traders and manufacturers. This is because they can buy machinery and other facilities on installment basis and eventually sell to buyer(s) charging full price.

With hire purchase, the sellers get the installments that include initial price and interest. Interest is usually calculated in advance and computed in the total installments to be settled by the buyer.

Pros of Hire Purchase

#1: Convenience in Payment

The buyer is often the great beneficiary since he or she is offered the opportunity of making payments in installments. Hire purchase is normally considered advantageous to individuals who have limited income.

#2: Leads to an Increase in Volume of Sales

Hire purchase often attracts more consumers due to the assurance that they will make payments in uncomplicated installments. This is the reason why such a system of payment can lead to an increase in volume of sales.

#3: Increased Profits

Courtesy of hire purchase, a seller will experience an increase in volume of sales. This will lead to increased profit to his or her business.

#4: Encourages Saving

The system encourages providence among buyers who are usually forced to save a portion of their income so that they can pay a portion of the installment. This infuses the habit of saving among the people.

#5: Lesser Risk

From the seller’s point of view, the system is of great importance as he or she knows that incase the buyer defaults any of the installments, he / she can regain full ownership of the product.

Cons of Hire Purchase

#1: Higher Price

Buyers considering higher purchase terms will have to pay higher prices for the products purchased, which include cost plus interest.

#2: Recovery of Installments can be Difficult

Sellers in most cases do not often get the installments from buyers on time. This means that they can be forced to incur their money trying to recover the installments. This in the long run can lead to serious conflict between the sellers and buyers.

#3: Heavy Risk

Despite the fact that the seller has the right to repossess back the goods from defaulting consumers, he or she runs a heavy risk under hire purchase system. This is because the products he/she will take will be considered second hand and will fetch little price.

#4: Creates Artificial Desire for Products

The system creates artificial want for items. The buyer is tempted to buy a product even if he or she does not afford or need to purchase it.

Costs to Be Considered

With hire purchase, there are two vital costs that require to be considered i.e.

  • Interest Rate Imposed for Financing

Rates are usually favorable to products with higher resale value like vehicles and agricultural equipment. Assets with low resale value such as vending machines and printers are offered less favorable rates.

  • Fee Charged By the Financing Company

Fee is charged for administrative work done on your request and for loan processing procedure.

The Essential Ingredient of Hire Purchase

The buyer will only become the owner of the item only after full and/or final payment of all installments is done. Until then, the buyer is considered to be hiring the product and every installment will be considered as hiring charges paid by him/her.

Bottom Line

Since the merits associated wit hire purchase outweigh the demerits, consider this system of payment the next time you’re buying item(s) so that you can experience the merits associated with it.