Network Finance - Latest News and Blog Posts #Business Finance

Third rate cut delivered this year as RBA trims cash rate to 3.60%

Tue, 12 Aug 2025 15:53:35 +1000

After last month’s unexpected hold, the RBA this month went with market expectations and delivered its third cash rate cut in 2025 in an attempt to ease cost-of-living pressures on Australian families.

RBA Governor Michele Bullock said in a statement that the Board unanimously decided to cut the cash rate by 25 basis points as underlying inflation continued to decline back towards the midpoint of the 2-3% target range.

How much could you now save on your mortgage repayments?

Unless you’re on a fixed-rate mortgage, hopefully your bank will soon follow the RBA’s lead and decrease the interest rate on your variable home loan.

For an owner-occupier with a 25-year loan of $500,000 paying principal and interest, this month’s 25 basis point rate cut means your monthly repayments could decrease by about $76 a month.

That would put $912 a year back into your household budget.

If you have a $750,000 loan, your monthly repayments will likely decrease by about $114 a month – or $1368 per year.

Meanwhile, a $1 million loan could decrease by about $152 a month – or $1824 a year.

This all assumes that your lender automatically passes on the full 25 basis point cut to your home loan.

Another thing to consider is that not all lenders automatically reduce variable home loan repayment amounts in line with rate cuts.

Some lenders simply maintain your repayment amount at the old level. It’s just that more of your money goes towards paying off the principal (rather than the interest) each month. But you can ask them to reduce your repayments in line with their cuts.

To find out what your lender is doing with your loan, get in touch with us in a few days once the dust has settled.

Still feeling stress from your mortgage?

Even with this latest rate cut, many Australian families are still grappling with living costs and interest rates that are higher than when they first took out their home loan.

If that includes you, now could be a good time to check in with us for a home loan health check.

You might be able to improve your situation by either renegotiating with your current lender, refinancing to another lender, or through debt consolidation.

Whatever your situation, we’re here to help you explore your options.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How Smart Equipment Finance Helped a Regional Contractor Win Bigger Jobs

Tue, 29 Jul 2025 22:36:34 +1000

The Client: From Operator to Owner

Starting as a dozer operator for a leading civil construction company, our client made the leap into business ownership two years ago — purchasing his first machine to hire back as a subcontractor. With two dozers already working on job sites and demand showing no signs of slowing down, he needed to act fast to add a third machine to his fleet.

The Finance Challenge

The client had his eyes on a low-hour 2019 Caterpillar D6T Dozer priced at $468,000. But there were hurdles:

He needed to preserve working capital.
His current lender had maxed out their exposure to him.
Historical financials.
The machine needed to be on-site within two weeks.

The Solution: Strategic Lending That Worked

We sourced funding from a non-major lender with a strong appetite for yellow goods and established clients in civil construction. Here’s what made the difference:

Presented a complete application, including accountant-prepared financials, a work source letter, and cash flow forecasts.
Negotiated a deal with only a 10% deposit upfront and GST deferred to month 4 — helping preserve cash.
Achieved fast approval (within 48 hours) and settled in just 5 days.

The Result

With financing in place:

The client secured the dozer before a critical project deadline.
Monthly repayments came in at approx. $9,950 (ex. GST).
The additional machine enabled an increase in net profit of ~$13,000/month.

Takeaway for Business Owners

This case highlights how understanding lender appetite and presenting a well-supported application can be the key to unlocking growth — even when traditional financials aren’t perfect.

If you're in civil construction or any capital-heavy industry, the right finance partner can help you take the next big step — without risking your cash flow.

Need help navigating equipment finance?

We’ve got the lender network, expertise, and turnaround time to help you seize your next opportunity.

Book a chat with us today

Heads up business owners: the asset write-off deadline is looming!

Thu, 11 May 2023 15:19:59 +1000

That’s because the temporary full expensing scheme is set to expire on 30 June 2023.

It will be superseded by a much less generous scheme, known as the instant asset write-off, so if your business could do with expensive new equipment, an asset or commercial vehicle, you might want to act quick!

What is temporary full expensing?

Temporary full expensing is similar to the popular instant asset write-off scheme, but with an expanded scope.

Originally a stimulus measure to address the effects of the COVID-19 pandemic, the scheme allows businesses to make significant asset investments.

Businesses can have eligible depreciating assets immediately written off in full with no cost limit.

Yep, that’s right … no cost limit on eligible assets.

Applied for with your tax return, the scheme can reduce the amount of tax you have to pay for the financial year – which means you can reinvest the funds back into your business sooner.

Trucks, coffee machines, excavators, and vehicles are just some examples of assets eligible under the scheme.⁣⁣

But to take advantage of it, the asset must be installed and ready to roll by 30 June 2023.

So you’ll have to act quickly!

Asset eligibility

To be eligible for temporary full expensing, the depreciating asset you purchase for your business must be:

– new or second-hand (if it’s a second-hand asset, your aggregated turnover must be below $50 million);

– first held by you at or after 7.30pm AEDT on 6 October 2020;

– first used, or installed ready for use, by you for a taxable purpose (such as a business purpose) by 30 June 2023; and

– used principally in Australia.

What if I miss the deadline?

If you miss out on the 30 June 2023 deadline, or your order doesn’t arrive in time, hope may not be lost.

You may still be able to take advantage of the instant asset write-off.

This scheme will allow for eligible purchases of up to $20,000 to be written off by 30 June 2024, as recently unveiled in the 2023 Federal Budget.

However, as you might have noted, the available write-off amount is significantly lower than the temporary full expensing scheme that’s coming to an end.

Need a hand with a business loan?

When purchasing an asset with the intention of using this scheme, it’s crucial to select a finance option that’s suitable for your business.

And that’s where we can help out. We can present you with financing options that are well-suited to your business’s needs now, and into the future.

So if you’d like help obtaining finance that’s gentle on your cash flow, and helps you achieve your long-term goals, please get in touch ASAP so we can help you beat the EOFY deadline.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Property secured business finance: All you need to know

Thu, 27 Apr 2023 02:43:50 +1000

If you are a homeowner looking to raise capital, property secured business finance could be the ideal funding solution.

You can unlock the value tied up in your home to grow your business or get funding to purchase or refinance a residential property.

Offering property security can increase your chances of being approved for finance. It can also help you access competitive rates and longer terms compared to other types of secured funding.

In this guide, we will explore the different types of property secured business finance.

You will learn how they work, who they are for, and how to apply.

What is property secured business finance?

Property secured business finance is an umbrella term for financing solutions that use property as security. The amount of funding you can access is determined by the value of the property you use as collateral. It includes business loans, home loans, secured working capital solutions, and credit facilities.

What can property secured business finance be used for?

Property secured finance can be used to purchase or refinance a home or for funding any business purpose. It can provide a cash flow boost to cover unexpected costs, raise capital for expansion, or long-term financing to help your business grow.

There are several types of property secured finance. Let’s take a closer look at each solution.

5 types of property secured business finance

1. Home loan for business owners

A home loan for business owners is a funding solution that allows you to unlock the value of the extra equity tied up in your residential property through refinancing. It can also be used as a funding solution to help you purchase a new home.

Unlike a traditional mortgage, a Home Loan for Business Owners can provide fast funding. There’s minimal paperwork required, and you can receive conditional approval in as little as 48 hours.

In 2021, the average Australian house price rose by 22% – the biggest yearly increase in over 30 years.

A home loan for business owners helps you unlock the extra equity in your property.

Who is it for?

If you are a business owner looking to purchase a home or refinance your existing property, you could benefit from this type of secured finance.

It is a cost-effective way to secure long-term funding without the headache of extensive paperwork and strict lending criteria required by the banks.

You can use a home equity loan for business purposes to get the funding you need to capitalise on opportunities quickly.

2. Business loan secured by residential property

A business loan secured by residential property is a solution that helps you to access higher funding limits and longer terms compared to many other types of secured financing. It works similarly to other types of secured business finance.

You will be able to borrow a set amount based on the value of the property you use as security and other affordability criteria. In most cases, you will be able to access up to 80% of the value of the equity you have built up in your property.

Once you receive the funding, you repay the amount borrowed plus interest over the agreed term.

Who is it for?

If you want to raise capital to fund growth, cover the cost of a management buyout, or invest in your business, a property secured business loan could be the ideal solution.

It is a good option for businesses looking to use residential property to secure funding.

A business loan secured against property can help you access higher funding limits and longer terms than many other types of secured finance. The property security reduces the risk for the lender, so the rates for a secured loan are typically lower than types of unsecured business finance.

You can use the funding for any business purpose, including refinancing existing debt.

3. Secured business overdraft

A secured business overdraft allows you to continue to access funds once your account balance has reached zero. It provides a safety net so you can access working capital during cash flow gaps.

It works similarly to a personal overdraft. Your funding provider will agree on an overdraft limit. You will be charged interest on the amount of credit you use up to your limit. You will stop paying interest once you lift your account balance above zero.

Because of the property security, you may be able to access a higher limit and more competitive interest rates compared to a standard secured overdraft facility.

Who is it for?

A secured business overdraft can be a good option for businesses that encounter cash flow gaps due to periods of growth, seasonal sales, or extended payment terms. It provides a financial buffer so that you can protect your cash flow from unplanned expenses.

If extended payment terms are stalling your business growth, a Debt Factoring facility, also known as Invoice Finance, could be an effective way to release cash from your outstanding sales invoices.

4. Business cash on call

Business cash on call is an alternative to an overdraft. It is a working capital funding solution secured by residential property. It acts as a line of credit that you can access when you need to.

You can draw down your balance to cover unplanned costs or bridge a cash flow gap and repay the balance later. It allows you to access as much or as little credit as you need every month up to your credit limit. You will be charged for the credit that you choose to use.

Because of the finance on property security, you can access higher credit limits and lower rates than other secured lending types.

Who is it for?

A property secured business cash on call facility can benefit business owners looking for a flexible line of credit to support working capital needs. You can access credit to cover cash flow gaps, unplanned costs, and pay suppliers.

It is an effective way to boost cash flow during periods of growth and a financial safety net you can use when you need it.

5. Secured debt consolidation loan

A secured debt consolidation loan can combine all your existing debt repayments into a single monthly repayment.

You can use property collateral to access a loan that can be used to pay off your other debts. You will then repay the loan provider over the term length.

Using property as security may help you access a lower interest rate than you currently pay for your existing debts. It also makes it easier to manage your business debts with a single monthly repayment.

Who is it for?

If your business has credit card debt, unsecured loans, or other existing debt, you may be a good fit for a property secured debt consolidation loan. The interest rates and charges on business credit cards and some unsecured loans are typically higher than the average property secured debt consolidation loan.

This type of funding could also be helpful if your business credit rating has improved since you last borrowed money. You may be able to access more competitive interest rates and reduce your monthly repayments.

What are the pros and cons of property secured business finance?

Using your property as security may lower your risk profile. As a result, you can typically access competitive rates and longer terms compared to other types of financing.

But all types of financing have advantages and disadvantages.

Here are the pros and cons of property secured business finance that you should consider before applying.

Pro: Competitive interest rates

Property secured funding is generally cheaper than other types of financing. The additional security reduces the risk to the lender, so you can usually secure lower interest rates.

Pro: High funding limits

You can usually access up to 80% of the value of the equity you own in your property. This typically allows you to get more funding than an unsecured loan or finance facility.

If you plan to invest in your business, a property secured facility can be a cost-effective way to raise a significant sum.

Pro: Longer terms

The terms for property secured business finance are longer than other types of financing like unsecured loans. This can lower your monthly repayments, so you better manage your cash flow and reinvest more in your business.

Pro: Accessible

If you have a low credit rating or short trading history, you may still qualify for property secured funding. Using your property as collateral can help you raise funds that you would not be able to access otherwise.

Con: You need equity

You need to own equity in your home that you are willing to use as collateral. If you do not own a residential property, you may still be able to access Invoice Finance, Trade Finance or Equipment Finance.

Con: Risk of losing property

There is a risk of losing your property if you cannot repay the funding. As with all types of financing, you should only borrow what you can afford.

Con: Extended application process

Depending on the type of funding, it can take longer to secure a property secured funding facility than other types of financing. The lender will need to determine the value of your property and equity before releasing funds.

Who qualifies for property secured business finance?

To qualify for property secured business finance, you will typically need to be an Australian business owner or self-employed individual who has held an Australian Business Number (ABN) for at least 12 months.

If you do not qualify for property secured funding, you may still be eligible for invoice finance. Instead of residential property, you can use your unpaid sales invoices as security to access financing.

What is the difference between secured and unsecured business finance?

The main difference between secured and unsecured business finance is the use of collateral.

With secured finance, the funding facility uses an asset such as your residential property as security. If you cannot meet your repayments, the lender can use the asset to recoup the finance cost.

You can also use business assets as collateral, including your accounts receivables, stock, and equipment.

With unsecured finance, the funding facility is not secured by any assets. Instead, the lender will provide funding based on your credit score, turnover, trading history, and other factors. You may also be required to provide a personal guarantee.

Because of the asset security, interest rates are generally lower for secured business finance. You may also be able to access higher funding limits and longer repayment terms.

Fixed or variable rate secured business loans

It is important to understand the differences between fixed and variable interest rates when you are considering your business property finance options.

A fixed interest rate means the rate of interest will remain the same for an agreed period or the length of the funding term. This can help you plan your budget as you will know exactly what you need to repay each month.

A variable interest rate means the rate of interest can increase or decrease based on a third-party benchmark or index like the Reserve Bank of Australia. If interest rates drop, your cash flow will increase.

A fixed-rate can protect you from any rise in interest rates, but you will also miss out on savings if variable rates drop.

How to apply for property secured business finance

It is easier than ever to apply for property secured business finance. You can get conditional approval within 48 hours of submitting your application with minimal paperwork required. Contact us to find the right financial solution for your needs.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

7 cash flow problems and how to fix them

Mon, 24 Apr 2023 02:04:24 +1000

While revenue and profit are important for business growth, cash flow is king.

If cash flow problems go unattended for too long, you could find your business in dire financial straits. According to the Australian Securities and Investments Commission, inadequate cash flow is the number one cause of business failure in Australia.

If you can spot potential problems ahead of time, you can take steps to address them before they impact your business. But it can be hard to notice liquidity problems early if you do not know what to look for.

In this guide, we will explore the seven most common cash flow problems. We will also reveal how to fix them and get your business moving again.

Cash flow problems explained

Cash flow problems are financial issues that occur whenever a business does not have enough incoming cash to cover liabilities or ongoing expenses.

Even a profitable business can encounter cash flow problems.

For example, if your business experiences a sudden increase in demand, you need to purchase more inventory and cover increased staffing costs to process the additional orders.

In most cases, these expenses would need to be paid before you receive payment from your customers. The gap between outgoings and incomings could create a cash flow problem.

How can cash flow problems affect SMEs?

Cash flow problems can affect SMEs in many ways. For example, a minor cash flow gap may result in a short-term increase in borrowing, but a serious liquidity problem could stunt business growth or even cause insolvency.

The most common issues caused by cash flow problems include:

Missed or late debt repayments
Overdue payments to vendors or suppliers
Delayed employee wages
Reduced customer satisfaction
Missed opportunities to grow the business
Additional debt

If left unchecked, multiple cash flow problems compound and can threaten the viability of the business. It is important to identify and address cash flow problems quickly.

7 common cash flow problems and solutions

Here is a breakdown of the most common cash flow problems and potential solutions to get your business back on track.

1. Not enough cash reserves

Cash reserves are the money your business has saved up for a rainy day. You can also use cash reserves to fund business expansion, pay debts, and cover operating expenses when cash flow slows down.

Unfortunately, many businesses do not have additional cash reserves to fall back on. Any sudden increase in operating expenses could cause liquidity issues when you do not have enough cash on hand.

The solution

You can fix the cash reserve problem with predictive forecasting. Creating a cash flow forecast can help you anticipate your cash flow each month. You can see how much money you need to cover expenses over a set period.

If saving a substantial cash reserve is an unrealistic goal, you should look at potential lending options you can access when needed.

2. Excessive borrowing

A business can get into financial trouble if it practices excessive borrowing. Too much debt can cause interest rates and payments to build up so much that they affect your cash flow and prevent you from paying for other business expenses.

The solution

Almost every business seeks financing at some point. But it is important to choose the right type of financing for your needs and avoid borrowing more than necessary.

If debt repayments are causing cash flow issues, you can investigate refinancing current high-interest debts. A secured business loan can be an effective way to consolidate existing debt. For example, if you have credit card debt or a high-interest overdraft, a business loan may help you to reduce monthly payments and interest fees.

3. Decreasing sales

There are lots of potential causes for decreasing sales volume. This can be due to seasonality, broader economic conditions, and other factors. If you make fewer sales, you will naturally see cash flow reduce as less money flows into your business.

The solution

Marketing is key to getting your products and services in front of the right prospects. According to the Gartner CMO Spend and Strategy Survey, the average marketing budget is 9.5% of total company revenue. But the right budget for your business will depend on your industry, life cycle, and other factors.

It is also important to communicate any sales volume goals with your marketing team. When your marketing team knows which products you want to focus on, they can create campaigns and promotional material that supports your sales goals.

4. Extended payment terms/outstanding receivables

Some industries have longer standard payment terms than others. Many businesses also offer extended payment terms to attract new customers. While this can encourage sales, it can also have a negative impact on cash flow.

In many cases, you will need to pay suppliers, wages, and overheads before receiving payment from your customers. This can cause a cash flow gap.

The solution

The best way to address late payments or outstanding receivables is to review your payment terms and collection policies. There are several ways you can encourage faster customer payments, including offering early payment discounts.

Once you have better control over your outstanding receivables, you can investigate invoice financing products. Invoice finance is a type of business finance that allows you to use your outstanding sales invoices as collateral for financing.

You can access up to 95% of the invoice value as a cash advance. Then, when your customer pays the invoice, you receive the remaining balance, less fees. In short, invoice financing helps you get paid faster for the products and services your business has already sold.

5. Excessive inventory

Overinvesting in inventory can tie up capital and reduce liquidity. You also risk getting stuck with products that you are unable to sell. There are many potential causes of excess inventory, including supply chain mismanagement, cancelled orders, and inaccurate sales projections.

The solution

To fix this cash flow problem, you should consider an inventory management system. This will help you balance your inventory and predict how much you should order ahead of time. It can also help you avoid understocking and leaving your customers disappointed.

6. Seasonal cash flow fluctuations

Many businesses operate with seasonal business models. If you make the most of your money for the year in a single season, working capital can become stretched for the rest of the year.

Cash flow for seasonal businesses is uneven, so it is important to be proactive about your business finances and make sure you can manage the imbalance in cash flow.

The solution

Accurate cash flow projections and sales forecasting are key to managing seasonal fluctuations. You need to plan for seasonal changes, budget appropriately, and avoid overspending in the off-season without compromising your business plan.

It is also important to buy enough inventory to capitalise on the busy periods when sales peak. Trade finance can be a useful financing option if you need to raise capital to purchase inventory and pay overseas or domestic suppliers.

With increased purchasing power, you may also be able to negotiate better terms with your suppliers.

7. Uncontrolled growth

A growing business is cash hungry. As your business grows, so do your expenses. You need to be able to cover your overheads and fund new orders. That requires investment.

If you cannot raise enough capital, you risk losing out on opportunities and turning away potential customers. Invest too much, and you risk stretching your working capital and experiencing cash flow problems.

The solution

Convenient access to financing is key to sustainable business growth. Debtor finance is one of the best ways to ensure cash inflows keep up with sales. You can use your accounts receivables to secure a flexible line of credit.

Unlike a bank loan or overdraft, the credit limit increases with sales revenue. As you grow and make more sales, you can access more funding.

Fund cash flow with us

Most cash flow problems are predictable and preventable. There is a range of financing options and strategies you can use to increase the flow of money through your business.

If you need some guidance, we can help. We will advise you on the right strategy and arrange a financing package that gets you the funding you need when you need it. Give us a call today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Cash flow finance: 4 working capital funding solutions

Mon, 24 Apr 2023 01:54:46 +1000

Cash flow is what keeps your business moving. If you cannot access working capital, you will struggle to grow your business.

When working capital is stretched, most business owners consider a bank loan. But strict lending criteria and a slow approval process mean this type of business finance often is not the best option.

A recent poll by RFI Global revealed that 70% of SMEs in the Asia-Pacific were less than satisfied with access to credit provided by their main bank.

Cash flow finance may be a quicker and easier alternative.

What is cash flow finance?

Cash flow finance is a type of business funding that allows you to borrow against your future business revenues. The financing can be structured in diverse ways to suit your needs.

Applying for a traditional bank loan can be clunky and slow. This is because banking institutions focus on eligibility criteria such as credit scores, company age, and financials. You will also need to use your residential property as collateral in most cases.

Cash flow lending providers judge the ability of your business to repay the loan based on revenue projections. This can be based on a percentage of future credit card transactions or unpaid invoices. Alternatively, some lenders will offer a line of credit to help with cash flow or a loan with a fixed repayment term.

Different types of cash flow finance

There are several types of cash flow loans, each with different funding and repayment structures.

Once you understand the different options, you will be better positioned to choose the right solution for your business.

Invoice finance

Invoice finance, also known as debtor finance, is a type of funding that allows a business to release the cash tied up in its outstanding sales invoices. You do not need to provide any additional collateral other than the invoice you want to fund.

Instead of waiting for your customers to pay an invoice, you can submit it for financing and receive up to 95% of the invoice value as a cash advance. Once your customer pays the invoice, you receive the remaining balance of the invoice, less fees.

There are many different types of invoice finance, with some facilities including additional services like collections and account management.

The cost of invoice finance depends on the type of facility, the creditworthiness of your customer, and other factors.

Business line of credit

A business line of credit is a flexible form of cash flow lending. These are issued by banks and other lenders and work in a similar way to a business credit card. The line of credit will allow you to draw cash up to an agreed credit limit.

The primary advantage of a line of credit is that you only pay interest on the amount you spend. It can provide ongoing access to working capital to cover your company’s cash flow needs.

Most business lines of credit are secured. Depending on the lender, you may need to provide property or business assets as collateral. Some lenders also charge ongoing fees as part of the funding facility.

Short-term business loans

A business loan has a set repayment schedule and is offered as a one-time lump sum. The interest rate can be fixed or variable, and you may need to provide collateral to secure the loan.

Business loans are usually repaid in instalments over a set term. Short term loans typically allow borrowers to pay back the finance for up to three years.

A business loan can be a good option for one-off expenses, but they are often unsuitable for business cash flow needs. You will need to pay interest for the whole sum secured at the outset, regardless of whether you spend it all. Many business loans also come with rules regarding how you can use the funding.

Merchant cash advance

A merchant cash advance is not like a standard cash flow loan. Instead, the lender will provide a specific cash amount based on future credit card sales revenue projections. The borrower will repay the loan via a predetermined percentage of their credit card sales.

The application process for a merchant cash advance is usually fast. You can get the financing in 24 hours if you prepare your paperwork first. You may also be approved for a loan amount worth up to 70% of your average monthly credit card sales revenue.

The repayment process for a merchant cash advance is automatic. Each time a customer pays using a credit card, a percentage of the amount automatically goes to the lender.

This would work for an SME with a high volume of card sales but would not be suitable for seasonal businesses or those with variable monthly sales revenues.

The cost of a merchant cash advance is also typically higher than other types of business finance.

Cash flow finance vs asset-based finance

Cash flow finance is primarily based on sales performance and projections. Potential lenders typically review your company’s transactions and other data to determine your ability to repay the loan.

Asset-based lending is a type of business finance that uses residential property or business assets as collateral to secure the funding. The lender will put a greater emphasis on the property and assets a company owns.

There are several other differences between these types of financing.

Cash flow loans typically allow you to access money quickly, as the lender does not have to appraise the asset before they can provide funding. Some asset-based lenders can take several weeks to review an application and provide funding.

With cash flow finance, you can be approved and receive funding in as little as 24 hours. Generally, the repayment terms will also be shorter than many asset-based lending products.

Cash flow finance and bad credit

Cash flow finance is generally more accessible than asset-based finance. You may still qualify for cash flow lending even if your credit rating is not perfect or you do not have a long trading history.

Lenders will look at your business’s sales performance and revenue projections to determine your ability to repay the funding. With Invoice Finance, the lender will review the creditworthiness of your customer before agreeing to fund an invoice.

Which type of finance is right for my business?

The right type of funding for your business will depend on your unique circumstances. Each solution has advantages and disadvantages, and some are more accessible than others.

If you need cash quickly, then invoice finance or a merchant cash advance can be much faster to arrange than a term loan or line of credit.

It also depends on how you want to access the funds. For example, do you need a lump sum, or would you prefer a facility that you can access as and when you need it?

If you want to use the funds for a one-off large business purchase, you may find that equipment finance is the better option.

You also need to make sure the funding will meet your ongoing needs. It can be helpful to create a cash flow forecast to gain a better understanding of your current and projected cash flow.

Cash flow finance Australia

If you need to cover an unexpected cost or raise funds to invest in growth, cash flow finance can provide access to working capital when you need it most. We are experts at unlocking value and helping Australian SMEs get the funding they need to succeed. Get in touch today.

Decoding Credit Scores

Fri, 31 Mar 2023 00:40:38 +1000

A Guide to Understanding Your Credit Score and Improving Your Financial Health

Your credit score is a crucial factor in determining your ability to obtain credit or loans, and it can greatly impact your financial well-being. However, many are not aware of what a credit score is, how it is calculated, or how to improve it. This infographic aims to decode credit scores in Australia and provide tips for improving your financial health.

By understanding your credit score and taking steps to improve it, you can enhance your financial health and increase your chances of obtaining credit or loans when you need them. Use this infographic as a guide to improve your credit score and take control of your financial future.

How Asset Finance Works - A Basic Guide to getting the Most For Your Business Assets

Wed, 08 Mar 2023 11:02:02 +1000

Having the right equipment is vital to the success and longevity of any business. It helps increase efficiency, maximise productivity and maintain a competitive edge.

However, funding the purchase of major equipment is often easier said than done, and buying it outright may not always be feasible for all SMEs. That’s where Asset Finance comes in.

What is Asset Finance?

This is where the financier can provide funding for major assets like vehicles, machinery and equipment.

Here are some examples:

Vehicles – Trucks, tractors or excavators
Machinery – Lathes, milling machines, CNC or drilling machines
Equipment – Forklifts, access equipment or telehandler

This kind of finance allows you to borrow up to 100% of the value of an asset and offers a fixed term and rate. You’ll make periodic payments until the equipment is paid off.

The amount of the loan you qualify for will depend upon the asset value and serves as collateral for the financing solution. Asset Finance saves the need to rely on property and real estate as security, or deal with the expensive nature of unsecured loans.

You definitely need to be confident that you’ll earn enough money with your business in the near future to repay the loan, as this is crucial for this type of financing to be successful. But as long as you can do that comfortably, Asset Finance is a smart move.

An Example

Say you’re looking to increase the efficiency of your warehouse. Your goal is to expedite the time it takes to place inventory in shelving and retrieve it when fulfilling customer orders. Maybe you’re currently using basic equipment like pallet jacks, but it’s just not efficient enough to keep up with demand. So you want to purchase a forklift.

An electric forklift with standard capacity might cost say $20,000 – $45,000 and up with an increase of $2,500 – $5,000 for a battery and charger. An internal combustion forklift with standard capacity may cost $20,000 – $50,000 and up. This makes it a significant investment, and many SMEs simply don’t have the money laying around to purchase a forklift upfront.

With Asset Finance, you could borrow up to 100% of the value of the forklift and pay it off over time making periodic payments. Rather than paying in one lump sum, you can stretch it out over a longer period, which makes it possible to make a large capital purchase like this. Once you’ve completed your payments, you own the forklift outright and it’s yours.

What are some specific benefits of Asset Finance?

There are three main reasons why business owners go this route. First, it offers flexible repayment options including interest-only periods.

Let’s face it. Running a business is expensive. The exact costs will vary depending upon the industry and size of a company, but business writer Gretchen Schmid says the initial startup costs for equipment usually range from $14,000 AUD on the low end to over $180,000 on the high end. And of course, most companies will end up making further investments in equipment as they grow and expand.

Asset Finance offers a framework that allows you to raise the necessary capital to get your business off the ground and keep adding or replacing equipment as needed. Rather than having to pay for a major expense like a forklift upfront, you can space it out over time, while having agreeable payment terms. And if you have interest-only periods, it can provide you with some additional financial breathing room.

Second, Asset Finance loans tend to be easier to qualify for than many other types of loans. You’ll find that many lenders aren’t overly stringent with their qualifications, which makes it ideal for business owners who have less than stellar credit. The application process is fairly straightforward, with many lenders providing approval within 48 hours. So, if you need to purchase equipment quickly, this is definitely a strategy to consider.

Third, it can give you a competitive advantage as well. By having access to key pieces of equipment, you can increase your efficiency and raise productivity levels in a way that would be impossible otherwise. You can boost your output, while reducing stress for your team members. Over time, this can have a dramatic impact on your bottom line and give you a competitive edge over others in your industry.

Bank vs Non-Bank Lenders

“There are several options available in the marketplace for obtaining equipment financing (Asset Finance),” explains ValuePenguin. “It can be obtained from sources ranging from traditional national lenders to smaller specialized online lenders.”

But at the end of the day, you have two main choices — a bank or a non-bank lender.

Going with a traditional lender like a major bank often comes with lower interest rates. However, they tend to be more strict with their credit standards. While this option may be suitable for well-established business owners with great credit, it’s not usually viable for less established SMEs with finances that aren’t in great shape.

Opting for a non-bank lender, on the other hand, usually means higher interest rates, but they’re a lot more flexible with their credit requirements. They’re also usually quicker with their loan application process. That’s why many business owners gravitate towards smaller, non-bank lenders — especially those who have struggled with their credit score.

How much money can you get?

The amount of money you borrow with an Asset Finance loan can vary significantly. But generally speaking, you can get as little as a few thousand dollars and as much as several hundred thousand.

There’s a lot of flexibility with this type of facility, and it should be sufficient for most SMEs to purchase the equipment they need. It’s just a matter of searching for a facility that meets your exact needs and reading through the details.

What are the typical interest rates and repayment terms?

Finally, what exactly can you expect to pay for interest rates?

According to ValuePenguin, fixed interest rates typically range anywhere from 4.00% – 12.75%. However, some can be higher at around 20%.

As for the length of repayment terms, some Asset Finance loans can be as short as several months, while longer ones can be as long as 10 years. Again, this will largely be determined by how much you borrow.

Fuelling growth with Asset Finance

Being able to obtain key equipment is a vital ingredient to the success of SMEs. After all, it’s hard to take the next step and move forward if you don’t have the right equipment.

Fortunately, modern business owners have plenty of options, with Asset Finance being one of the best. Taking the time to become familiar with how the process works and learn about the benefits should help you determine if it’s a smart move for your company.

We offer a range of flexible finance solutions to help businesses access the capital they need to grow. Speak to us today to explore your funding options.

Types of Business Finance

Wed, 08 Mar 2023 10:52:35 +1000

Cash flow and profit are not the same. Many successful businesses need funding to support working capital and fuel growth plans.

Unexpected costs, slow-paying clients and many other factors can put a strain on your finances. Almost a third of Australian businesses say their available cash would allow them to survive less than three months. When cash flow becomes stretched, you need to explore your funding options.

But getting business finance is a significant challenge, with traditional lenders becoming increasingly risk averse. However, there are several alternative financing solutions to help business owners manage their cash flow and get the capital they need.

Here’s a rundown of the potential sources of funding you can explore when looking for financing.

Debt Finance or Equity Finance

There are two main types of funding that a business can use to secure financing:

Debt Finance

The business receives funding from a third-party source and repays the money borrowed plus interest and fees.

Equity Finance

A third party provides funding in exchange for part ownership or shares in the business.

Within these categories, there is a range of financing solutions designed for different business needs.

Types of Debt Finance

Debt finance is the most common type of funding and encompasses traditional and alternative funding sources. You don’t need to offer any equity in exchange for funding, but you will typically need to repay the sum borrowed plus interest.

Bank Loans

A bank loan can provide a large lump sum to cover large purchases or fund the expansion of a business with a strong credit rating. The principal plus interest is repaid over a set period of regular repayments.

Such loans are a very rigid type of funding that is out of reach for many businesses. The application process can last several months, and strict lending criteria mean you will need to submit a detailed business plan, provide collateral and have a strong financial track record.

Business Credit Cards

Business credit cards can support working capital and cover everyday business expenses. They are more accessible than a business loan, but credit card interest rates and fees can be expensive and quickly mount up if you don’t clear your balance each month.

Credit cards are typically used to cover small purchases. If you require more substantial funding to pay suppliers, cover overheads or fund expansion, there are more affordable and better-suited alternatives.

Invoice Finance

Invoice finance is a flexible funding solution that allows a business to turn its outstanding sales invoices into a source of readily available funding. Instead of waiting 30+ days for your customers to pay, you can use invoice finance to receive up to 85% of the invoice value as a cash advance. When your customer pays the invoice, you receive the remaining balance less fees. (Note: Invoice Finance is also known as Debtor Finance or Receivables finance).

Unlike a bank loan, you don’t need to use your home as collateral. There are two main types of invoice finance: factoring and discounting. You can read more about the difference between these solutions in this blog post.

This type of funding is available to businesses that sell to other businesses and raise sales invoices for their goods and services.

Asset Finance

Asset finance is a type of finance that helps a business to fund the purchase of high-value assets, including new and second-hand machinery, equipment and vehicles.

It can also be used to help a business release the capital tied up in the high-value assets they already own.

This form of financing typically involves hire purchasing, finance leasing and operating leasing. Unlike a traditional loan, the asset the business wants to purchase acts as collateral for funding, so there is no need for property security. The business makes regular repayments over a set period to pay back the principal and interest.

Trade Finance

Trade finance is a funding solution that helps importers and exporters to cover cash flow gaps and mitigate the risks involved with trading internationally. It can also be used for domestic trade, along with other solutions like supply chain finance.

By using a third party to finance a transaction, the supplier can be sure they will be paid once the goods are shipped, and the buyer has some protections to ensure they will receive the goods.

Buyers can use trade finance to cover cash flow gaps waiting for shipments and use the funding to negotiate early payment and bulk buying discounts. Suppliers can release the money tied up in goods sold and speed up cash cycles.

For a more detailed look at this type of funding, read the blog post How Trade Finance Works.

Line of Credit

A line of credit allows a business to pay for everyday expenses, cover emergency costs and fund expansion. It works in a similar way to a business credit card or overdraft.

You can draw down on the available credit whenever you need. As you take out funds and make repayments, the available credit limit increases and decreases accordingly.

This type of funding is often used alongside an invoice finance facility. You draw funds as and when you need them, and make repayments when you raise and submit a new invoice to the finance company.

Merchant Cash Advance

A merchant cash advance is a financing solution for businesses that process significant volumes of customer card payments. The amount you can borrow is determined by the value of the card payments you process at your business.

Once funding is in place, every time you process a card payment, a percentage of the payment value is automatically used to repay the principal and interest on the sum owed. The amount you repay in a month depends on the value of the card payments you process.

This type of funding can help businesses with seasonal sales cycles, but there are many pros and cons to a merchant cash advance and interest rates are usually higher than other types of financing.

Types of Equity finance

Equity finance covers a smaller range of funding solutions. With equity finance, you will need to give up a stake in your business in exchange for funding. There are no repayments or interest, but you will need to share some control and profits with your investors.

Crowdfunding

Crowdfunding has become a popular way for startups and innovative companies to seek funding. You don’t need to have a strong credit rating or collateral to secure financing, but you will need to create a strong promotional campaign to attract the attention of potential investors.

This is a long-term funding solution. You’ll need to have a compelling pitch and be willing to dedicate lots of time and effort to promote your business. Getting crowdfunding is likely to be a long process, and there’s no guarantee you will raise the funds you need.

Venture Capital

Venture capital is a possible funding source for businesses with high growth potential. You’ll need a scalable business plan and to have achieved some success already to appeal to investors. Before a venture capitalist is willing to invest, they’ll want to audit your business so you’ll need to keep your accounts and business plan up to date.

This type of funding is out of reach for most businesses, with venture capitalists looking to invest significant sums of money in companies with a high chance of producing a large return.

Angel Investors

This type of equity finance has some similarities to venture capital. Essentially, you offer shares or part-ownership in your business in exchange for funding. You’ll need a detailed business plan, up to date accounts and growth potential to attract potential investors.

Angel investors typically work alone and use their own money to fund investments. Alongside funding, an angel investor can offer experience, connections, and advice to help you grow your business.

Finding an angel investor can be challenging. You’ll need to attend events, explore mutual connections and expand your network to increase the chances of finding an investor.

Family and Friends

Mixing business with personal life can create problems, but friends and family may be able to offer financial support to help you grow your business. Many of the most successful companies, including Amazon, were started on the back of a loan from a family member.

If you do seek funding from friends and family, be clear about the terms of the financing. Put together a basic contract outlining the share of equity or repayment terms.

Determining the Type of Business Financing You Need

When you’re determining which type of business finance is right for your business, ask yourself the following questions:

How much capital do I need?
How quickly do I need funding?
What types of funding will I qualify for?
How much can I afford to repay per month?

If you require regular funding to cover cash flow gaps as your business grows, a flexible Invoice Finance facility could be a good solution. For more substantial business expenses, a bank loan or Asset Finance solution could provide the capital you need.

We offer a range of flexible finance solutions to help businesses access the capital they need to grow. Speak to us today to explore your funding options.

How to Value a Business to Get a Good Deal

Tue, 07 Mar 2023 01:05:25 +1000

Business valuation is a process where the economic value of a company unit or business is determined through a number of different means. Creating an accurate business valuation is critical to ensuring that both sides of an eventual sale are getting a fair deal, or that your business’ worth is accurately reflected for tax reasons.

As a business owner, you will need to have your organisation valued at some point, but if it’s your first time, the process may appear confusing or complicated. While we would always recommend recruiting a professional to help you through the different areas, it’s still important that you understand the basics. To help you, we’ve created this simple guide that outlines everything you should know.

Questions to ask yourself before starting

One of the challenges of business valuation is that ‘value’ can mean different things to different people. For instance, a particular business owner may believe that their organization is an essential service to the local community, and is therefore very valuable. However, to a buyer who is only focused on the financial side of things, the value will simply lie on how much money the business is making both in the short and the long term.

What are the current market conditions?

The supply and demand of what a business offers also plays a large part in determining overall value. A business may have a bad month due to external factors or may have an unusually good one; making the value appear higher or lower than it actually is.

Also consider supply and demand. If the market is flooded with similar businesses, your value may be lower. However, if a business is in a niche or in high demand, it’s valuation will naturally be higher.

What is the difference between price and value?

It’s important to differentiate the price of the company from the value. The value of a company is what potential buyers will pay, based on how successful the company will be for their specific goals and interests. The price is the actual monetary worth of the company at the time of sale, based on the current market and how much the overall assets are priced.

The Three Ways to Measure Business Value

Broadly, there are three different ways that you can measure the value of a business: Either through available assets, the current market, or the actual income.

1. Valuation through Assets

When using an asset approach you’ll be looking at the business purely in terms of assets and liabilities, where the balance sheet tells the entire story of the business.

Assets refers to items of value owned by the business. For example, products, inventory, office furniture, equipment and any office space. Bear in mind that assets can also include non-physical elements such as software and patents. You may even have assets you didn’t even know about, so make sure that you understand your true value. To find out more, read our article on exploring your hidden assets.

Your assets will also include your Debtors Ledger, which essentially records the part of a company’s accounts that shows money owed to the company. Having a healthy Debtors Ledger where you are clearly owed money shows that the company has value.

Liabilities are what the company owes, and are therefore money that is ‘going out’. Examples of business liabilities include outstanding bills, rent, taxes, employee salaries and other expenses.

Sometimes, it’s not quite as simple as just subtracting one from the other. It will be tempting to just look at the balance sheet to see what’s coming in and going out, but this might not be the best way to see the whole picture. For instance, hard numbers might not reflect intangible assets and liabilities such as patents, trademarks and proprietary ways of conducting the business. It might be possible that these kinds of assets have a much higher monetary value (or liability) than first imagined.

2. Valuation through the Market

By knowing the market, you’ll be able to justify the asking or selling price to truly get the best deal in your business valuation.

However, the world of business is fast-moving and you will need to do your research. For instance, if you’re looking for a business to buy, it’s important to look around and see what similar businesses are being sold for to make a more informed decision. The same principle applies if you’re selling, so that you can avoid pricing yourself out or selling too low.

With so many variables, there needs to be a way for both buyers and sellers to feel comfortable. This is where Fair Market Value comes into play. The Fair Market Value of a business will be established when willing buyers and sellers reach an agreement, where both sides have all of the facts and neither side is being forced in any way to carry out the transaction.

3. Valuation through Income

For many buyers or sellers, the income approach is the most direct way to decide on what they want to do. It gets right to the core of commerce and just looks at the money being made. After all, buyers and sellers are naturally going to want to get the best deal possible, for the least amount of effort. If the economic benefits aren’t there, then there’s no point.

By taking the route of Income Valuation, you’ll be able to understand what kind of money the business is currently bringing in, what the potential is for more, and what the risks might be. Another reason why buyers and sellers might prefer this approach is that it shows the business value in the present, instead of in the past or the future.

To get this real-time look at the income, you can take two different routes: Capitalization or Discounting.

Capitalization - This approach is best suited for businesses with predictable, steady and regular earnings. To put it in the simplest possible way, Income Capitalization occurs when the expected business earnings are divided by the Capitalization Rate, which is calculated through the net income and current market value of the asset.

The idea here is that the business value is defined through its earnings, in the context of the wider market. For instance, if the Capitalization Rate is 44%, then you can assume the business is worth four times its annual earnings.

This is one of the more complex valuation methods, so we recommend working with experienced accountants and valuation professions for this particular route.

Discounting – Occurs when you forecast business income over a predefined period of time, usually over a number of years. Then a Discount Rate (the required rate of return to make a business acquisition worthwhile) is calculated which estimates the risks of not receiving that income in time, if at all.

The final step is estimating what the business is most likely to be worth at the end of the forecast period. If the business is expected to keep running beyond this period, there will be Terminal Value (also known as Residual Value) which, when discounted together with forecast earnings, gives you a pretty good idea of what the business is worth at present.

If your business is struggling with cash flow and it’s affecting your valuation, you can also look to unlock the cash in your sales invoices by using Invoice Finance solutions.

Which method is best?

When valuing a business to get the best possible deal, the method and process you ultimately end up determining the outcome. For example, think about two business buyers who have an eye on the same business but use different valuation methods. Each buyer will have different opinions about what risk is, and how much they are willing to take on. They will have their own perceptions about what is most valuable to them, and where they see the future of the business.

Even if they end up using the same valuation methods, the results still might differ. This is known as the Investment Value standard. In this context, each buyer of the business is considered to be an investor and therefore measures the value of the business based on their individual investment goals.

Which one should you use?

The bottom line here is that business value is ultimately in the eye of the beholder. What is a good deal for one person may not be so good for another. If you are buying or selling a business, it’s best that you use a range of valuation techniques to get the best possible picture of the business worth and potential. By using only one avenue of valuation, you might not be able to make a completely informed decision.

We offer a range of flexible finance solutions to help businesses access the capital they need to grow. Speak to us today to explore your funding options.

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Third rate cut delivered this year as RBA trims cash rate to 3.60%

Borrowers around the country have been delivered a sunnier financial outlook this month after the Reserve Bank of Australia (RBA) today trimmed the cash rate by another 25 basis points to 3.60%. How much could your monthly mortgage repayments decrease?

How much could you now save on your mortgage repayments?

Still feeling stress from your mortgage?

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Heads up business owners: the asset write-off deadline is looming!

Business owners wanting to buy a vehicle, asset or important piece of equipment and immediately write off the full cost have just over a month to act.

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Asset eligibility

What if I miss the deadline?

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