The end of one financial year and the start of another is a landmark time in the business calendar. Apart from the busy period of last minute purchases to maximise tax deductions, running EOFY clearances and finalising finances for annual accounts, it is also an opportune time for review. But for some businesses seeking to expand with new machinery purchases with equipment finance or set up a new operation, this can be a challenging period.
Reflecting, reviewing and resetting business finance at the start of a new financial year can be an effective strategy to establish a solid operational framework through the next 12 months. It can also be a time when many budding entrepreneurs and aspirational employees branch out to set up their own business operations.
For new business aspirants seeking to start new enterprises, challenges may be faced when sourcing equipment finance. Challenges such as not meeting the conditions for loan approval for many banks and some non-bank lenders. But attractive finance options and rates are available for business operators that don’t meet the criteria for machinery and equipment finance as set by many banks. Even for those that are currently formulating their new business plans and are in the very early stages, workable finance for machinery and equipment can be sourced at cost-effective interest rates. You just have to know who to ask.
New Business Loans and Finance: Overview
Sourcing finance involves looking beyond the traditional sources and utilising the professional services and resources available to assist new businesses. Specifically in our case, using our broker-style services and the far-reaching resources we offer, to source the required finance on your behalf.
Banks can be limited by their corporate guidelines around lending. Often this relates to the trading period of the business in order to be eligible for business loans. This may be 12 months or 24 month minimum trading period. For new businesses, clearly it is not realistic to consider meeting that criteria.
Other criteria may be in regard to the information required to complete a business finance application form. Typically this includes providing details of financials such as the annual accounts, tax returns, BAS returns and profit and loss statements. A business which is in the early stages is not likely to have such financial documentation, referred to in the industry as ‘docs’.
To suit business operators in this position, specialist lenders such as Jade Equipment Finance offer Low Docs and No Doc Equipment Loans. Due to the criteria for this type of finance, it is not usually available through major banks and through some large finance companies.
There may be lenders that offer loans effectively to ‘all-comers’ but at exorbitant interest rates. Before even going down that route, speak with us and see what cost-effective solutions we can offer with our Low Doc options.
Low Docs and No Docs Finance
Low Doc and No Doc are a classification of the loan applicant and relate to businesses that have little of none of the financial documentations which is traditionally requested to fully the obligations of a business loan application.
Despite not requiring the financials, there are certain requirements such as the business having a current ABN and ID. Any financials that can be provided to support the application may be viewed positively by our lenders and provide reason for the offering a better interest rate.
We have accreditation with specialist non-bank lenders that offer this type of finance and can handle the process on behalf of our customers. Each application is handled and assessed on an individual basis and each loan offer may or may not include its own special conditions.
These can, in some instances, included the request by our lender for additional security or personal guarantee be provided by the business owner and reducing the total amount of the loan requested. Our consultants will be negotiating hard to achieve the loan terms and conditions that work best for our customer to support the set-up of their new business.
Finance Product Options
When a business owner is approved for Low Docs or No Doc Finance, they may select from the range of asset finance products which are available to other businesses.
The equipment finance products include:-
- Equipment Lease
- Chattel Mortgage
- Rent to Own
- Commercial Hire Purchase
The decision around which of these is best-suited to an individual business will depend on a number of factors especially in regard to accounting matters. Referring to an accountant for advice on this matter is strongly encouraged.
Interest Rates
The RBA is currently in the process of normalising monetary policy through a series of rises in the cash rate. This is flowing through to lending markets including equipment finance lenders. Higher rates mean higher repayments which can place pressure on cash flow. So sourcing the cheapest possible interest rates on finance is even more important.
For small and emerging businesses, if the forecasted rate rises have not been factored into the business plan, the need to achieve the cheapest interest rate finance may be further intensified.
The good news is that Low Docs and No Docs loans do not, merely by definition, attract higher interest rates. Workable, better rates can be achieved by businesses seeking this type of finance.
As the business is yet to establish a trading record it is unlikely to have established a credit rating. Once finance is applied for, a credit profile is established. For small businesses in this situation, the credit rating of the business founder and owner may be assessed and taken into account.
The take-out – if you’re planning to start a new business and intend to apply for finance, get your own credit score and profile in the good range as a priority.
Moving Forward
New businesses, regardless of size or industry or the type of equipment being purchased, can use the services of Jade Equipment Finance. You will be assigned your own consultant who will be your personal contact point and handle your requirements. We have an impressive track record and extensive experience in securing affordable equipment finance at better interest rates. So don’t despair if you don’t meet bank loan criteria. Contact us to discuss how we can assist.
Contact Jade Equipment Finance on 1300 000 003 for affordable equipment finance for new businesses.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.
