Finance for Small to Medium Business

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By Brandon CHUAHBy Brandon CHUAH

FINANCE ESPLANADE Integrity . Service . Success

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Topics Covered today

Types of Business Finance AvailableLender requirementsHow to Present your finance proposalBenefits of going direct to your BankBenefits of using a Finance Broker


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It is important that you get the correct type of loan to meet your funding requirements.Funding long term asset purchases using short term funding (Overdrafts or Lines of Credits ) could lead to lenders wanting to review your facility as being a hard core debt.Long term funding facilities for short term purchases can have a negative impact on day to day cashflow of the business.


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FINANCE ESPLANADE

Integrity . Service . Success

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Business Term LoansBusiness Term LoansBusiness Lines of Credit/ OverdraftsBusiness Lines of Credit/ OverdraftsEquipment Finance Equipment Finance (Leasing and Hire Purchase)(Leasing and Hire Purchase)Agri-Business- Farm lendingAgri-Business- Farm lendingDevelopment Finance (construction)Development Finance (construction)

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Longer term funding requirementseg Purchase FactoryBusiness Loans generally are for a Maximum term of 15 yearsInterest Only periods usually available for up to 5 YearsSet regular monthly or quarterly loan repayments

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1) Short term finance

Working capital Funding day to day running

of the business Most expense in terms of interest rates

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2) Medium term finance Usually 3 to 10 years term Loan purpose : finance equipment,

business expansion, development of new products etc.

3) Long term finance More than 10 years Loan purpose : purchase land, buildings, plant and machinery, business or franchise

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Overdraft / Line of Credit

Shorter term funding requirements to meet working capital requirements

Peaks and troughs of cashflowUsually no monthly payment requirements

as long as facility is within the approved funding limit

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Debtor financeProvides cash advance to business against

credit sales.Loan is “repaid” when debtors pays the

invoice

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Debtor finance (ctn…)Fee structure : Management fee – 0.75 – 2% of invoices

received Discounting Fee – Interest charged on the

money advanced, plus fees. Arrangement Fee – One off fee to cover legal

charges, setup fee and government charges

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Equipment FinanceTax effective lending for business equipment that

has a limited lifespan (usually up to 5 Years)Funding allows business equipment and vehicles to

be renewed on a regular basis.Do not pay the full up front cost for the asset.

Reduces impact on cashflow.The asset being purchased is the security.Usually has a residual debt to be paid out from the

sale of the asset at the expiry of the contract term

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Hire PurchaseThe financier will purchase the asset and

hire it back to the customer for a period of time.

At the end of the contract, the customer will take ownership of the asset.

Tax deduction is available if the asset is used for business purpose.

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LeasingCustomer will enter into rental agreement

with financier. Financier is the legal owner.At the end of the lease term, customer will

have the option whether to purchase the asset from financier at residual value.

Rental payments can be claim as full deduction .

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Specialised lending for Farming and Agriculture

Primary production income required to fund these loans.

Farming land is usually the primary security.

Many Lenders have business units that cater for farm lending

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Construction or Land subdivisionProject SpecificBuy, build/subdivide, sell and clear debt.Viability of the Project, experience of the

developer and presales are all important to the success of the project, as is the developers financial capacity to handle unexpected cost blowouts etc.

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Comprehensive Business Plan- incorporates the following:

Business AcumenAreas of specialty (what is your

businesses point of difference)SWOT AnalysisMarketing initiativesCompetitor analysisExpansion/growth plans

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Financial data2 Years Taxation Returns for Business and

individual DirectorsCashflow Forecasts (particularly for New

Businesses)Up to date BAS statements or Management

accounts (Quickbooks, MYOB or similar) Statement of financial position (Assets and

Liabilities)Security offered

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Be transparent. Tell the Broker/ Lender the full picture.

Provide all information as highlighted earlier (full financial data, business plans, Bank statements etc)

Be confident and sell yourself and your business. It is important the lender has confidence in your management ability and skills to run the business successfully.

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Bank direct VS

Finance Broker

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Relationship with local ManagerYou know the Bank and have rapport

But Xyou do get their off the shelf price,

whether good or badXWhat happens if they do not approve the

finance

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Access to all Lenders in the marketDetermine which loan package will be best

to meet your business needsKnowledge of competitive pricing offers

available

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Path of least resistance with the Lenders (e.g. is Low Doc available?)

Saves you time by doing the leg workRelationship is with your Broker who

liaises with the LenderUsually the Lender pays the broker a

commission so the service is free to you.

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Residential finance Commercial finance Personal finance Bookkeeping

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What services we provide :

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Follow through the whole finance application

Listen and understand your needs

Provide you professional advises

Save you time

FREE service!

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END

[email protected]:

0433989177

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Finance for Small to Medium Business

Economy & Finance

Transcript of Finance for Small to Medium Business