Effie Zahos
Smarter Writer

Effie Zahos is editor of Money magazine and has over 22 years' experience in the finance industry.

Effie Zahos
Smarter Writer

Effie Zahos is editor of Money magazine and has over 22 years' experience in the finance industry.

If your business needs an injection of funds to forge ahead, there are funding options to help your enterprise on its way.

For many small businesses, having access to readily available funds is critical to the ongoing success of the business, yet many don't know the options available to them. From debtor financing to borrowing from your self-managed super funds, here at the potential ways to find funds to keep the business moving.

cartoon man in suit pumping up arms with money

1. Put it on the house

Lenders love collateral, and if you can stump up residential property as loan security, you’ve got a decent chance of securing bank finance at interest rates only slightly higher than a home loan. For example, ME Bank’s residentially secured business loan costs upwards of 6.38 per cent. Bear in mind – if the business fails, you may lose the property used as security.

2. Vendor financing

If new plant and equipment is needed, vendor financing may be an option. Providers like IBM and Caterpillar provide in-house funding for new equipment – the cost varies.

3. Debtor financing

Instead of waiting weeks or even months for the cash from debtors to trickle in, debtor financing provides immediate cash worth up to 80-85 per cent of your receivables. Check out funding options through Bibby, Asset Secure and Scottish Pacific.

4. Revenue based funding

Revenue-based financing involves an investor providing capital funding in return for a percentage of gross revenue. The arrangement lasts until the original sum plus a set multiple has been repaid. There’s no need to put up personal assets as security and if revenue growth is slower than expected, the revenue-sharing payments are reduced. Take a look at providers like Next Step Capital.

5. Angel investing

Business angels are typically experienced businesspeople − often retired or semi-retired, looking for opportunities to use their skill and capital to earn solid returns. To connect with a like-minded angel take a look at iPitch, muru-D or contact the Australian Association of Angel Investors.

6. Private equity

In essence private equity funding and venture capital matches high net worth individuals with businesses offering growth potential. It’s a tight market though. Figures from the Australian Private Equity and Venture Capital Association (AVCAL) show Australian venture capital funds are currently invested in around only 200 start-ups while private equity funds are currently invested in fewer than 350 local businesses. If your venture will attract serious investors visit AVCAL’s website.

Today's small business could be tomorrow's Apple Inc.

- Effie Zahos, Money Magazine

7. Microenterprise loan

Recognising that today’s small business could be tomorrow’s Apple Inc, some of our biggest banks offer microenterprise finance at very low rates. For instance, National Australia Bank’s Microenterprise Loans, includes a loan of up to $20,000 at a fixed rate of 5.99 per cent plus business mentoring for ventures with up to five employees. Conditions apply.

8. Put it on the plastic

Used wisely, business credit cards can offer pluses. The debt is unsecured so you won’t need collateral; you’re only charged interest on money spent; and your business may enjoy from 35 to 55 days interest-free. Shop around. Check out St George Bank, BankSA and Bank of Melbourne for business credit cards charging 9.99 per cent interest. For an overall look download the latest (August 2014) Business Credit Card Star Rating report from research group Canstar.

9. Borrow from your self-managed super fund

Self-managed super funds are allowed to lend to your business, but strict rules apply. No loans to individual fund members or relatives, though it can lend to the company or trust through which the business is operated. The loan cannot exceed five per cent of the fund’s total assets, but you’ll need specific paperwork for the tax man. Bear in mind – if the business fails, your retirement savings could go too.

10. Government grants

Start by looking at the $20,000 Business Growth Grant offered as part of the Entrepreneur’s Infrastructure Programme − conditions apply. To learn more about business grants, log onto business.gov.au, click on “Advice and Support”.

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DISCLAIMER

This information provides a brief summary only. It’s important to discuss funding options with your accountant, financial advisor or lawyer to discuss what is appropriate for your business, as well as the associated risk.
Prices correct at time of publishing.

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