For too long, Australian SMEs needing funds to operate and grow have seen only one option: go to the bank and ask for a business loan.
In the years following the financial crisis, many businesses saw that option narrow to zero: as the banks were forced to trim their lending, successful SMEs who didn’t have a suitable trading history, credit record or property as security were turned away.
Fortunately, Australian business owners have become aware of many new options for business finance. Some of those options are genuinely new ideas; others are modern versions of age-old finding techniques made more practical by fintech.
Many of the SMEs that tried these techniques will never go back to the clunky bank loan. They don’t want the delays, the paperwork or the drain on monthly cashflow that comes with a two year commitment to borrow a fixed amount. For those who haven’t tried alternative business funding methods yet, here are five of the best ways to ensure your business gets the cash it needs, without having to ask the bank manager.
1. Alternative Lenders
There are now scores of non-bank lenders in Australia, mostly using online portals to offer alternative business loans. These are typically less bureaucratic than bank loans and faster to come by, and many alternative lenders will consider funding businesses that have been turned away by the banks. All that comes at a cost, which is passed on to the borrower in the form of higher interest rates and fees. Apart from that, a loan from a non-bank lender is essentially the same product as a business loan from a bank, but with more flexibility and higher interest rates.
2. Invoice Finance / Invoice Discounting
It is possible to significantly speed up your cashflow, and therefore the money that you have to invest in the growth of your business, by using clever, specialist finance. Invoice finance, sometimes called debtor finance or invoice discounting, is a highly effective business funding method that is suitable for all B2B sellers. It works by providing the money you are owed in invoices upfront, so that instead of waiting 30-90 days for a payment, you can start investing and growing today. TIM Finance specialises in flexible invoice discounting and uses an advanced platform to get you the money your business need, quickly! Invoice Finance is based revenue or sales, not profitability to for those businesses that are either only a few years old and not yet profitable or even those that have been around for a while but are focusing on top line revenue growth to capture market share, Invoice Finance is an ideal solution to help fund a growing business. Enquire now – you might be surprised at just how much capital you can raise in this way!
3. Supply Chain Finance
It is also possible to use clever funding techniques to improve your cashflow going the other way – by paying your suppliers early and using the preferential rates available to cover the cost of funding these payments until you are ready to ship the relevant order. Supply Chain Finance is ideal for steadily growing businesses and can be used alone or in conjunction with Invoice Finance (if needed) to raise considerable sums for both working capital and specific growth capital on an ongoing basis. TIM Finance now also offers supply chain finance, and we can arrange flexible facilities on a single, easy to use account, with a revolving facility that grows as your business grows.
4. Crowd-sourced Funding
One truly new area of finance that has opened up thanks to digital technology is crowdfunding. The idea is to get lots of people to lend or invest a small amount of money. There are many portals allowing individuals to raise cash in this way and crowdfunding is also very popular for charity or social enterprise projects. For businesses, Australia has introduced relatively strict rules on what must now be called equity ‘crowd-sourced funding’, several regulated providers are making this available.
5. Get an Equity Investor
Another way to source more permanent capital is to do a capital raising and in return sell some equity in the business to new/incoming shareholders. Of course, there are many pros and cons to this, none of which we will be discussing in this article other than to say subject to where in the lifecycle a business is at, Venture Capital or Private Equity or an equity sale to friends and family could well be a good option.