Small businesses are the backbone of the Australian way of life, yet more and more small businesses are failing than ever before. Covid has certainly impacted in a dramatic way, even allowing for the Government’s intervention via Jobkeeper. Yet, what will happen when those payments stop?
What pushes most small businesses under is a lack of immediate cash which induces them to seek a small business loan. The main drawback in doing this is making sure the business is going to be able to pay back that loan. In order to qualify, there are several requirements that small businesses have to meet. Including but not limited to:
1. Business Plan
There has to be a business plan in place. The original business plan when the business started (if one was even developed then) or one to plan out the uses for funds and the projected financials based on the loan. Many businesses lack the wherewithal to create such a plan but they really must as a plan is vital to know where the business is heading. In Australia, I am happy to recommend Norrish & Associates as a firm that can provide such plans. Contact details here.
2. Collateral
If at all possible, collateral will need to be demonstrated for the loan. This can be equipment, machinery, land and building or anything else of value. Having collateral gives the bank or finance company something to put a lien on in case the business still fails.
3. Good Credit Rating
Business credit scores need to be good. These scores are used just like personal scores are and can affect the amount or availability of small business financing. Ensure you know how your business rates.
4. Sole Traders and Partnerships
If the business is a partnership or has multiple partners, anyone who owns more than 20% may have to have a significant personal score so check these too.
5. Lending Requirements
Each lender will have different requirements that will need to be met. The best way to make sure you are covering all your bases is to check with the lender first and see what those requirements will be. That way you won’t go into the loan process and have issues because a step wasn’t prepared for. Such a lack of preparation will cost you time because you’ll have to satisfy that requirement before the process can continue. And that may be time you don t have.
The Right Loan
Also, make sure what type of small business loan or financing you really need. There are several types and each are geared for a specific set of needs. Do the research and make sure you’re looking at the right type of loan, otherwise you may undercapitalize and still wind up in the same position you re in now. Take your time and make sure your efforts are going to lead you to success.
Certainly, seek expert help and, again in this regard, I can recommend Michael Norrish at Norrish and Associates. The recommendation isn’t given lightly and is based on many years of good business principles and successful operations.