If you’re new to owning a business or are considering your finance options for the first time, it can be overwhelming. There has never been more choice for Australian business owners then right now. Plus, with the major banks becoming increasingly restrictive with their lending post Royal Commission findings, we are seeing more SME’s exploring their options than ever before.
Alternative-finance providers, non-bank lenders, Fintech’s. What are they?
Don’t let the jargon confuse you. Alternative/non-bank/fintech’s are private businesses, like us, that specialise in offering business loans to small to medium businesses.
Alternative finance providers leverage online technology to make risk-based pricing decisions and offer greater flexibility. By doing so, it allows lenders to assess your business based on your performance, rather than if you own bricks-and-mortar which you are willing to offer up as security.
Alternative lenders are giving thousands of Australian small businesses the opportunity to grow based on their business’s performance, where they may not have had the opportunity to otherwise.
What can the loans be used for?
If you are aiming to grow your business, sometimes that needs to be done through finance as you may not have the funds on hand to invest into your operation. By taking out a loan and paying interest, you are giving your business the means to grow. The income you generate from that investment in your business should generate more than the interest you are paying on that loan.
A few reasons people take out business loans are:
– Working capital.
– Shop fit out.
– Consolidation of debt.
– Meeting tax obligations.
– Re-branding/ marketing.
– Purchasing of new business equipment or tools.
At Funda, it’s your choice how you use your Funda loan, because you know your business best. We provide finance for any business purpose that will assist you in reaching your potential.
Why would someone choose an alternative finance provider over a bank?
It’s no secret that financing your business’s growth WILL be cheaper through a traditional bank lender. So how could it be that these same institutions are potentially restricting your growth? The answer: their rigid requirements.
Depending on your business’s circumstances these requirements might fit your business model perfectly. If that’s the case, congratulations! We recommend you keep your financing requirements with the traditional lender that offers you the lowest interest rate. However if this isn’t the case, there are some great options available to you through fintechs (non-bank lenders).
Some of the major reasons business owners are turning to non-bank lenders are:
-Faster assessment outcomes and quicker access to funds.
-Less paperwork and a more simplistic application process.
-More flexibility in the terms available.
-Unsecured options. The ability to borrow money without having it lent against the business owner’s personal assets/property.
-Assessment based on the big picture. With us the assessment process is less rigid than the bank because we understand every business is unique.
Take Funda customer Ben Donaldson, Builder and Founder of Magnetic Shoes Co, for example. After experiencing a frustrating series of road blocks from a mainstream bank Ben came to Funda to find a better way. Ben was seeking a business loan asap to fund a new project, magnetic shoes to enhance the safety of roofing trades. With 60% on pre-order from Australia’s leading building supplier Stratco, we understood what a great business opportunity the venture was. Ben got access to an $80,000 loan from Funda within 12 hours and was able to turn the $80,000 loan into $260,000 in revenue.
How do I know what is the best option for my business?
Unfortunately we don’t have the answer! Every business is unique and will have different requirements which will help in determining what the best option is for your individual business. However, here are two things we strongly recommend being aware of when exploring finance providers:
– Compare quotes. Our advice to business owners is to compare like-to-like. It’s important to shop around, however comparing a factor and a diminishing principal interest rate is not comparing apples-to-apples. The way we recommend weighing up your options is by looking at the contract value. All loan quotes you receive should list a contract value. This is the total cost of the loan over the term of the loan. It is the best way to understand the true cost. But remember to also take into consideration how making extra repayments will impact the cost of funds.
– Early repayment terms. With some finance providers, interest for the loan is charged upfront and applied to the loan balance, which is repaid over the loan term. So paying off the loan early won’t save you interest charges. By choosing a loan with a diminishing principal, payments get smaller as you make repayments because the interest is charged on the outstanding balance, it doesn’t remain constant.
We are Funda.
Giving Aussie small business owners a fair go is something the entire Funda team are extremely passionate about. We strive to be different to banks and other FinTech loan providers by being the most personal business finance partners in Australia. If you would like to chat about your options, please get in touch via us here.