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Let’s Talk: Discovering loan options, negotiating better

Welcome to this week’s edition of Let’s Talk, where we delve into funding options and provide expert tips for negotiating better loan rates.

In today’s fast-paced and dynamic financial landscape, acquiring the necessary funds can be crucial to achieving your goals, whether launching a new venture, purchasing a dream home or investing in personal growth through education.

Understanding the available funding options is the first key to unlocking the resources you need. Traditional avenues such as banks and credit unions offer various types of loans, including personal, business, and mortgages. 

However, the lending landscape has expanded significantly in recent years with the rise of alternative lending options. Exploring these options can widen your choices and lead to more favourable terms.

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Shaun Broughton, Managing Director, APAC and Japan at Shopify

Shaun Broughton, Managing Director, APAC and Japan, Shopify
Shaun Broughton, Managing Director, APAC and Japan at Shopify

“Concerns about inflation and subsequent interest rate rises have led businesses to explore alternative finance options, such as debt or equity funding to stay afloat.

“Traditionally, businesses have opted for debt financing from banks, credit unions, and online lenders due to their convenience and security, however this has become expensive of late. Other businesses, particularly startups, prefer to raise equity funding, which typically comes from venture capitalists or crowdfunding. But with liquidity tightening, a lot of venture finance has dried up.

“Businesses should review their options and absolutely shop around. It’s also important to consider what the long term effects of choosing a particular option might be.

“For retail businesses, alternative options like Shopify Capital can be a game-changer for businesses looking to remain agile and flexible. This financing option offers businesses quick access to funding to support business growth and expansion into new markets, however repayments are based on an agreed fixed percentage of sales – lowering cash flow risks by removing the uncertainty of fluctuating interest rates and hidden fees, whilst protecting your business from weakened consumer demand.”

Angela Vithoulkas, Business Strategist & Founder & Host of SME TV

Angela Vithoulkas

“There are several funding options available for SMEs – think bank loans, government loans and grants, venture capital, investors, and crowdfunding can work, too – but my tip is don’t go it alone.

“The best thing I ever did was get a mortgage/finance broker who understood my business and could advise me on what finance options best suited my circumstances. And business circumstances change a lot.

“If you are going it alone, don’t settle for the first offer either – shop around. Always ask for a better deal – remember they aren’t doing you a favour. You’re paying for the loan, and since you’re the customer, you deserve the best service and deal you can get. Be prepared to walk away if you can’t get a good deal. It’s a negotiation, not a fait accompli.”

Moses Samaha, Executive General Manager ANZ at Equifax

Moses Samaha, Executive General Manager ANZ at Equifax

“There are many funding options available to small businesses for obtaining a loan. Loans can be provided by an external lender, such as banks, brokers, fintechs and smaller credit providers. They offer a range of finance products – both short and long-term. These include business loans, lines of credit, overdraft services, invoice financing, equipment leases and asset financing.

“Loans can vary in interest rate, interest rate type (fixed or variable), fees and security. You need to be prepared before entering a negotiation. Go to the credit providers that specialise in your type of business and prepare a cash flow statement, your tax returns, fiscal year-end financial statements, and year-to-date financial statements for the past three years.

“One of the most valuable tools in your negotiating toolbox is your credit report. Obtaining your Business Credit Report and Score via a service like SwiftCheck allows you to get a clear picture of your business’s credit history and see how credit-worthy you are in the eyes of lenders. Understanding your credit worthiness enables you to manage and improve your business’ credit file prior to application, and feel confident that a lender will see you as a ‘safe bet’ when you’re ready to borrow capital.”

Beau Bertoli, Co-Founder and Chief Revenue Officer, Prospa

Beau Bertoli
Beau Bertoli, Co-Founder and Chief Revenue Officer, Prospa

“If a small business is looking to grow their business or manage their cash flow, then a business loan or business line of credit may be a great option. When looking at available funding options, it’s important that small businesses first understand the full cost of the funding, including fees, loan features and repayments – and this is where a small business lending expert like Prospa, can really make a difference in getting the funding solution they need.

“A small business loan may be better suited to large, one off-expenses. For example, if a business needs to upgrade its digital infrastructure or run a marketing campaign and need funding to get it off the ground. Prospa has loans available up to $500K and the debt on the business loan is paid across a fixed repayment term. Flexible options like daily or weekly repayments are also available based on the business’s needs.

“By contrast, a business line of credit is a facility that allows a small business to draw down on an agreed amount of funds over a set period of time, and may be a more suitable funding solution for small businesses with smaller ongoing needs or that rely on stock turnover. For example, retail businesses can access these funds to pay for extra stock at busy times, and only pay interest on the amount that is used.

“When negotiating a better rate, small businesses could work with a business lending specialist to understand their overall business health and creditworthiness, to help shape the loan terms and borrowing capacity of business.”

Dhanush Ganglani, Managing Director, Eden Exchange

Dhanush Ganglani, Managing Director, Eden Exchange
Dhanush Ganglani, Managing Director, Eden Exchange

“Whether you’re a first-time business loan applicant or a seasoned entrepreneur, navigating the financing options available can be overwhelming. There are a variety of funding options worth exploring, including traditional bank loans, alternative lenders, asset-based lending and SBA loans.

“Of course, when it comes to securing a loan, negotiating a better rate is always the goal. To improve your chances, there are a few things you can do. First, research and compare different lenders to find the best fit for your needs. Next, make sure you have detailed financial statements and a solid business plan that shows you can repay the loan.

“Maintaining a good credit score and having collateral can also help you secure a better rate and position yourself strongly should you wish to sell your business in the future. And don't forget to build a good relationship with the lender — showing your track record of success can go a long way.

“As an example, at Eden Exchange, we leverage our relationships with our 40-plus financing partners to help business buyers secure the most favourable terms possible. These partners offer competitive rates and provide guidance on improving creditworthiness, collateral and financial statements to increase the chances of securing a better rate.

“Every business purchase is unique, so obtaining guidance tailored to your specific circumstances is key.”

Angus Sedgwick, CEO of OptiPay

Angus Sedgwick
Angus Sedgwick, CEO of OptiPay

“In the current economic climate it’s hard for many SME’s to gain access to traditional finance and it’s worth businesses considering other options. Invoice financing is the number one form of business financing in the United States, United Kingdom and Europe and allows a business owner to unlock the cash that’s tied up in their unpaid invoices. The financier gets paid when the debtor makes payment so there are no repayments to be made. Typically, businesses can access up to 90% of the sale value of an invoice whilst continuing to offer credit terms to customers. It’s a powerful form of business funding and allows cash flow to be maintained. SME owners may currently feel disheartened as access to capital tightens which is why it’s important to look at alternatives. Choose the right type of funding for the current position of your business and make sure it also aligns with your plans for the future.”

Andrew Ward, CRO, Banjo Loans

Andrew Ward

“For SME owners, understanding your taxation obligations is critical for your success.  Doing so will ensure you pay the appropriate amount of tax, and assist you in achieving your business goals.  There are numerous SME taxes to understand, and accordingly you may need the assistance of an advisor such as an accountant. 

“Possessing a good understanding of taxation obligations will assist with:-

  • Financiers – who will be interested in the status of your taxation affairs.  They will review whether you are up to date on obligations such as PAYG, Company Tax, GST, and Superannuation Guarantee payments. Being able to articulate your tax situation clearly will maximise your chances of obtaining business finance;
  • Business continuity – being up to date, or having mutually agreed payment arrangements with the ATO will minimise any unexpected issues including ATO enforcement actions;
  • Minimising penalties from the ATO – in respect to late lodgement of returns, including interest charges which can be substantial;
  • Ensuring that your taxation obligations are up to date – to minimise any potential for personal liability as a Director.

“Possessing taxation knowledge and ensuring your affairs are in order will reduce the likelihood of expensive audits, reducing unnecessary costs, and ensuring your time can be spent on more important issues such as business growth.”

Nick Frandsen, Co-Founder at Dovetail

Let’s Talk: Discovering loan options, negotiating better

“There are many avenues available to startups seeking capital beyond your traditional bank loan. One of the lesser-known options is venture studios. Like venture capitalists (VC), venture studios invest people, time, and often capital into startups to help them succeed. Unlike traditional VCs, however, venture builders help burgeoning startups grow, particularly by supporting those that lack expertise in a particular area.

“Referred to as “the new breed of VCs”, venture studios bridge the intersection between an agency, incubator, and a VC, by revolutionising the startup ecosystem and how entrepreneurs approach their business. Overseas and locally, this unique hybrid model has proven successful, having built some of Australia and New Zealand’s fastest-growing startups, including Provider Choice, Marmalade, and Runn.

“By collaborating with a venture studio that aligns with your businesses’ values, goals and vision, startups can find product-market fit and scale faster than they could independently.”

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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