Category Archives for "Finance Options"

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.

Invoice Finance Melbourne: Definition, Perks and Disadvantages

Owning a small to medium sized business and worried about the working capital of your company? It is true that contacting all your customers who have not paid their invoices causes a lot of stress. What can you do to improve this situation? Invoice financing is the solution! Now you are probably wondering: “What exactly does invoice finance mean?

Invoice Finance Definition

Invoice Finance is a form of alternative financing that is often used by small and medium-sized enterprises (SMEs) that are looking for a flexible and user-friendly way for funding. In this blog, we explain what exactly Invoice financing means, why this form of funding is particularly beneficial for SME entrepreneurs and whether Invoice Financing is suitable for your company.

Here are five reasons to opt for invoice financing

Fast cash available

Have you applied for bank loans and are you frustrated about the time that this entire process takes? Here invoice factoring comes to your rescue. With invoice finance, in most cases, you receive the amount of money on the same day that you submit the invoice. Is not that great? In this way, you prevent the risk that customers will affect your cash flow by paying too late.

Low factoring costs

Over the years, the prices for using invoice have dropped dramatically. Generally, factoring costs vary between 1% and 4.0% of the trade volume. Of course, the rates vary per industry.

Sustained growth of your business

If you want to develop your small business, you need stable cash flow. Here invoice finance comes into action. With invoice factoring, you focus more on recruiting new customers than on wasting time on your debtors. As a business owner you pay your suppliers, and at the same time, you avoid problems in the distribution chain. You can also provide credit lines to loyal customers who need credit facilities. All this together helps you to stay ahead of your competitors, who have financing problems and thus grow your business.

Focus on your core activities

Can you not concentrate on your core activities because you are worried about your financial problems? Switch to invoice financing. With this, you can always pay off your debts on time. It provides a reassuring feeling and ensures that you can entirely focus on the growth of your core activities and your customer service. And the best part is that you do not have to worry about the cash flow.

Receive money without incurring new debt.

When starting a small business, debt can be the best way at that moment. However, this can be risky when your company is unique. If you can not deliver the money on time, you will face legal problems. You want to avoid that, right? What can you do to prevent this type of situation? Choose invoice finance. You do not have to opt for an expensive loan because you receive the much-needed capital for your business from the factoring companies.

Benefits of invoice finance

  1. Allows you to increase turnover/sales
  2. Offers the possibility of extending payment terms
  3. Allows you to maintain excellent relationships with your contractors and positively affects the image of your company
  4. Eliminates the risk, guaranteeing the recovery of receivables for invoices
  5. offers the possibility to reduce administrative costs.

Disadvantages

The main disadvantage of invoice finance is that you also have to pay an invoice fee, regardless of interest. It is either a fixed amount per invoice (for example 10 euros) or a fixed price (for example 20,000 euros per year) or a percentage of turnover (often between 0.1 and 1%). It can also be a combination of these. With Australian Style invoice (sales of invoices) you pay no interest, but only a percentage of the turnover (ranging from about 1 to 4%). Incidentally, the costs for invoice have fallen sharply in recent decades. The expectations show that this trend will continue.

Another possible disadvantage that you can experience is the ‘action’ that comes with it. Depending on which form of invoice finance you choose, a factoring company may require you to include a pledge clause, that your stocks are audited, and that pledge lists are sent. Practice shows that most companies get used to it (after 1 or 2 months). Customer satisfaction with factoring companies is generally quite high.

The range of alternative forms of financing has increased considerably in recent years in Australia.

1. Peer-to-peer (P2P): A well-known example of this is crowdfunding, where a large group, often individual investors, invest, lend or donate money via a platform. In 2014, three billion euros were spent in Europe via P2P (FTM, 2015), which according to PWC will increase to € 150 billion around 2020 (Peer pressure, PWC, 2015). Benefits of a crowdfunding campaign: a successful attack can provide a lot of exposure, it offers direct access to capital from a variety of investors and is reasonably comfortable to start.

2. A credit union is a non-profit bank for a specific region, sector or professional group and in fact functions as a cooperative. Entrepreneurs who are members of a credit union make money available, which is then granted by the board to entrepreneurs within the union.

3. Online lenders such as Spotcap are technologically driven companies that can quickly decide whether a company is eligible for a loan through the use of data and algorithms, in combination with knowledge. Unlike banks, where it takes an average of three weeks to get a definite answer, Spotcap can decide within 24 hours.

The following companies and businesses are particularly suitable for invoice finance:

  • Wholesalers/importers
  • Secondment / employment agencies
  • Printing/graphic industry
  • Clothing companies/fashion
  • Transport

Equipment Finance Melbourne: Definition, Perks and Disadvantages

Equipment Finance Overview

Most businesses need equipment in order to operate or even to exist. The type of business and the kind of equipment you need are the key factors that determine whether to buy or seek financing. Equipment financing helps all types and sizes of Australian businesses obtain the machinery, vehicles, or other equipment they need to conduct their operations.

Equipment finance helps businesses that are finding it hard to access other forms of financing since the equipment acts as security and may be taken away if the business is unable to pay. As such, lenders do not exceed the value of the equipment when offering businesses equipment finance. Also, the length of the loan does not exceed the economic useful life of the equipment.

Equipment finance helps all types of businesses, but more so small businesses and startups that may not be able to get financing through the traditional funding methods. Equipment can be financed in virtually every sector of industry such as manufacturing and mining equipment, vessels and containers, IT equipment and software, agricultural equipment, construction equipment, office equipment, among others.

Benefits of Equipment Financing

1. No down payment

Unlike most traditional forms of financing, equipment financing makes it possible for businesses to get 100 percent financing without any down payment. This is key especially for firms who don’t have cash but need equipment to function.

2. Helps Businesses Maintain Cash

Since you are not required to pay anything when getting the equipment finance, businesses are able to hold on to their cash, or working capital, which can be used to fund other areas of the business such as paying for overhead expenses, expansion, marketing, or improvements.

3. Hedge against Inflation

Equipment financing provides a hedge against inflation because instead of paying the full cost up front in today’s dollars, the interval payments delay your outlay of funds. In addition, you get to pay for the equipment at the price and rates that were locked in at the date of closing. The financing company absorbs any devaluation of the payments as a result of inflation and other financial risks.

4. Keep up with the latest technology

Technology is ever evolving. What seemed amazing yesterday is replaced with something better today, which is then replaced with something even better the next day. To stay ahead of the competition, businesses need to invest in the latest technology which may not be possible without financing. Equipment finance provides a way for businesses to get the latest equipment as soon as it is available.

5. Leverage equipment expertise

Since you don’t really own the equipment until you have fully paid for it, the equipment financier may provide asset management services to help track the status of the equipment. They may also provide services like installation, maintenance, and de-installation of the equipment.

6. Disposal

In some cases, the equipment financing company may help businesses dispose of their equipment making it faster, easier, and less likely to attract penalties as a result of improper disposal.

Disadvantages of Equipment Finance

1. Restricted Use

When you buy equipment using equipment financing, you don’t own the equipment until you have paid fully for it, which can take years. You have to get into an equipment financing agreement which may restrict utilisation of the equipment. You are also not allowed to make any modifications without seeking permission from the financier.

2. Higher Cost

The cost of equipment financing is much higher than the cost of buying the equipment in cash.

3. Equipment can be taken away

Failure to pay as per the agreed terms under the contract may result in repossession of the assets by the financier.

Interest and charges

On average, equipment finance rates in Australia 5-6% depending on the type of equipment and the time period.

Alternative forms of financing

There are other options for businesses looking for ways to get financing to buy equipment. Some of them include:

1. Bank Debt – A traditional bank loan impacts your available credit and may dip into your cash reserves. Also, most banks do not offer 100% financing.

2. Chattel Mortgage – this provides businesses with immediate ownership of the financed equipment.

3. Using Angel Investors – investors bring in their money in exchange for shares in the business or a slice of the company’s profits.

The following are some of the companies offering equipment financing in Australia:

  • Heavy Vehicle Finance
  • Equipfin
  • LeaseCorp Finance
  • NAB

Line of Credit Loans Melbourne – Definition, Perks and Disadvantages

What is a Business Line of Credit?

A line of credit (abbreviated as LOC) is nothing but a standing amount of money which a financial institution can extend to a borrower. The borrower has the privilege to withdraw the available amount of LOC, provided that the borrowed amount never exceeds the maximum limit. In other words, LOC refers to a specified amount of standing credit which a borrower may draw at any time. The borrowed money needs to be paid back within a specific time frame, at a specific interest rate. Thus, LOC allows businesses to easily borrow the required funding, pay it back, and borrow it again (if required).

Unlike a loan, here, the interest is calculated only on the actual amount of borrowed money. For example, if you have a LOC limit of $20k, but you have withdrawn only $5k, then the interest will be charged on $5k (i.e. the actual amount of withdrawn money on LOC).

How Does Line of Credit Help Businesses and Which Types of Businesses Are Suited to Getting It?

In general, line of credit loans are suitable for all types of businesses (especially for small businesses). Poor handling of cash flow or insufficient funding is a common problem for small-sized businesses. Luckily for them, LOC will be one of the most suitable and ideal solutions to ensure sufficient cash flow at the critical times. In fact, LOC is something that every business should ideally have in order to ensure a proper cash flow which is crucial to fulfilling business-oriented goals and growing the company.

Unlike the traditional loan system, that offers you a lump sum amount of cash to be paid back at a variable/fixed interest rate over a specified timeframe, the LOC lets you draw and use the available funds only when you need them. Consequently, this process grants you a better control over your finance. Additionally, you’re only required to pay the interest on your actual borrowed amount.

Also note, LOC is commonly termed as revolving credit. It helps you continually access the available funds, enables a greater control over your business finance, and offers you the freedom to easily take growth-driven decisions.

Major Perks/Benefits of LOC

  • Instant Cash: With LOC, you can easily get instant cash (as per the available limit) from any financial institution.
  • Flexible: Unlike a business loan, a line of credit lets you draw and access money only when you need it. This flexibility enables you to easily and efficiently deal with the occasional cash flow problems that may hinder/impact your business growth.
  • Lesser Interest: As mentioned earlier, you are required to pay interest on the amount that you’ve actually drawn, not the total available amount.
  • Easy Application Process: As a small business owner, if you are eligible for LOC, then you can actually get the funds processed and credited into your account within 1 – 3 days. The application process is simple, easy, and quick.

Some Disadvantages/Limitations of LOC

  • Hard to Get: Your company/business can apply for a LOC only if you have a good trading history, sufficient number of assets, and great credit limit. If not, then it may be really tough and difficult to be eligible for a line of credit.
  • Up-front Fees: In most of the cases, you need to pay some up-front fees in order to obtain the funds.
  • Liability: For any reason, if your business fails, the borrowed amount of LOC needs to be repaid. Otherwise, you will be personally liable to re-pay the debt based on the structure/foundation of your business.

Line Of Credit Interest Rates & Fees

In Australia, the interest rates for the line of credit loans can actually vary (depending on your financial institution). In most of the cases, the interest rate can be something in the range of 5% – 13%. Some up-front fees may be also charged when you’re applying for LOC including application fees and establishment fees etc.

Alternatives Forms of LOC

The typical term loan can be an alternative to LOC where the entire lump sum amount of money is paid to your bank account and you have a specified time-period to repay it back.

Four Well-known Australian Companies That Offer LOC

Now that you’ve already revealed the basic nitty-gritty of line of credit loans, you can start making smart and meaningful choices to growing and financing your business. If you feel that LOC can be a good option for your small-scale or medium-sized business, then you can contact the below-mentioned Australian companies and submit your loan application. Rest assured that each of these lenders is reliable, reputable, and ready to fund your business.

For your reference, here’s the list of companies where you can apply for LOC.

  • Lend.com
  • businessloans.com.au
  • moula.com.au
  • commbank.com.au

Guide to Merchant Cash Advance

What is Merchant Cash Advance?

Are you a business owner and need quick access to funds to sort out a short term capital issue? Well, not worry; you can leverage your credit card merchant to access cash. A merchant Cash Advance is an excellent alternative to the strict credit and long approval process required for a conventional bank loan. Now, to be clear, a merchant cash advance is not a loan, but an advance payment agreement against your investment’s future income.

How Merchant Cash Advance Works

A merchant cash advance service provider gives you funds and then you repay the amount using a certain percentage of your credit card receipts. This could be daily, weekly or monthly. The percentage is known as retrieval rate or holdback rate. It can be anywhere between ten to twenty percent depending on your venture’s credit card sales, the repayment period and the amount being
advanced. The repayment period can be as long as 24 months or as short as 90 days depending on the advance amount.

The exact amount of the advance will be determined by your credit card sales. The service provider will review your business’s receipts over the last 3 to 6 months to ascertain how much you are eligible for. But generally, the amount can range from 30 percent to 200 percent of your credit card transactions. Repayment starts immediately you receive the advance.

How Merchant Cash Advance can help your business

Nowadays when you think of a business loan, most us think of banks. That’s perfect for large corporations and big businesses but it can be unfeasible for individuals and small independent businesses. If you can relate to this situation, then merchant cash advance is for you. If you need money quickly and your business has enough cash flow to make advance payments on a daily basis, then this loan can help. The MCA offers a perfect solution for small businesses to secure funds for growth.

An option for all types of businesses

The MCA is ideal for all kinds of businesses including partnerships and sole traders. It can also be used by beauty salons, entertainment venues, restaurants, clubs, pubs, retailers and more.

Pros of Merchant Cash Advance

  • Easy to set up

One of the main advantages of this option is that you can obtain money very quickly and easily. Actually, it can be secured in less than a week! This can be of great help if you need money quickly and you no other alternatives.

  • Easy to get

Securing this kind of funding is fairly easy as they have high approval rates. Technically all you need to apply for the MCA is a government ID and at least 6 months of bank statements. But keep in mind that some service providers may require extra documentation.

  • Perfect credit is not a must

Most cash advance companies check your personal credit as part of their review process. However, perfect credit is not required. This feature can be important for business owners who have little or no credit information.

  • No collateral

Another outstanding advantage of the MCA is that the service providers do not require collateral. Although the provider may take a lien against some of your business’s assets, you do not need to have collateral to get funds. The only mandatory requirement is a good sales record and solid potential for future sales.

Cons of Merchant Cash Advance

  • High interest rates and fees

Perhaps the biggest disadvantage of a merchant cash advance is high interest rates and fees. The fees charged by most service providers ranges from 20 percent to 80 percent of the funds advanced. So make sure you know the fees charged by your lender to decide whether not the funding is viable.

  • It is a purchase of your of a certain percentage of your future income

Technically, the MCA is not a loan. The lender buys a section of your future income at a certain discount. Though this is convenient when it comes to repaying the loan, it reduces your future revenue significantly.

  • Not Regulated

The service is not governed by any laws or regulated by any government body. As such, the fees and interest charged can be high. Keep this in mind when looking for the ideal lender.

  • Short Terms

Compared to other small business funding option like bank or credit card loan, the terms of an MCA can be very short.

Merchant Cash Advance Interest Rates & Charges

As mentioned earlier, this kind of funding can be extremely expensive. Some rates can be as high as 80 percent of the cash advance.

Alternatives to Merchant Cash Advance

  • Term loan-This is similar to a car or a mortgage loan. You borrow a certain amount which is repaid over a certain period. The rates are variable and can be unsecured to secured. The repayment period can be anywhere between 12 months to 5 years.
  • Bank loans; A good option for both large and small businesses. The problem however, is meeting the strict requirements of the banks .You must have a collateral and an appealing credit history.
  • Asset Based Loans-This is where you use your business’s assets to obtain funding. This is ideal for firms that have considerable asset value and don’t want MCA. The rates are usually lower than that of a merchant cash advance.

Companies/businesses that offer Merchant Cash Advance services

  • Beyond Merchant Capital -https://beyondmerchantcapital.com.au
  • Merchant Cash -https://merchantcash.com.au
  • Aaafin -http://www.aaafin.com.au
  • Adyen.com -https://www.adyen.com