Rapid growth and changes to demand in your business can often stretch your resources.
There is a range of flexible business loans available to suit different business needs from finance for business working capital, finance for purchasing a new business or franchise, buying or investing in commercial property, residential and commercial property development and equipment finance.
Talk to a Loan Market commercial mortgage adviser to find out more about structuring your business loan, term loans, cash-flow finance, property development finance, hire purchase, chattel mortgages and leasing finance.
A Loan Market commercial loan specialist will help you structure your business loan to match your unique business needs to the right business finance product.
Overdraft and line of credit
A business overdraft is an ideal financial option to cover short-term finance needs, particularly seasonal requirements and unexpected expenses. A business overdraft operates as a line of credit facility that is most commonly used to cover working capital requirements.
Business overdraft facilities work by providing access to an agreed amount of money. You can draw down up to your limit at any stage, and there are no repayments required as long as the amount you have drawn down and the interest charged does not exceed your agreed limit.
The overdraft facility operates on a variable interest rate with a cheque account attached, and you may or may not need to provide security or collateral, depending on the lender.
Business loans and term loans
A business or term loan provides you with flexible access to finance when you need capital for purchasing a business, or additional capital for business expansion, major plant and equipment upgrades, or purchasing commercial property.
The flexibility is in the loan type both fixed rate and variable rate business loans are available and you can usually choose to make principal and interest or interest only repayments.
Business loan terms vary widely between lenders, but can be as long as 30 years; the minimum loan amount you can borrow also varies widely so you will need to discuss your mortgage adviser.
You may be required to provide some form of security or collateral, such as residential or commercial property or business assets.
Cash flow finance
Cash flow finance provides your business with access to the money tied up in outstanding invoices, allowing you to continue meeting your working capital requirements in periods of fluctuating or irregular cash flow.
With cash flow finance your business will generally be able to access funds totalling up to 80 per cent of the value of your unpaid invoices, which is particularly useful during periods of rapid growth, business acquisitions or seasonal sales cycles.
The outstanding value of your invoices acts as security so there is no need to use residential or commercial property or sales goods to secure a cash flow finance facility.
Property development finance
Development finance is very similar to a residential construction loan, operating as a draw-down facility whereby you access funds required at each stage of the development, rather than the entire loan at one time.
Most lenders will allow you to capitalise interest during the development period, with the full loan falling due upon sale of the development.
A minimum loan amount may apply to a development finance facility, usually around $500,000.
A hire purchase is a finance arrangement used to pay for goods over a period of time usually one-to-five years rather than paying the full cost upfront, with ownership retained by the financier until the hire purchase term is complete and you have made your final repayment.
At the end of the hire purchase term the title of the goods automatically passes to your business.
Repayments on a hire purchase can be quite flexible and are often tailored to your business needs, ideal if your business operates on irregular cash flow due to seasonal sales cycles.
A chattel mortgage is similar to a residential mortgage, except the finance provided is used to purchase vehicles or equipment rather than property.
With a chattel mortgage, ownership of the goods passes to you on purchase; however, the title to goods remains with your financier until the mortgage is repaid in full.
You may also be able to claim some tax benefits, including depreciation and the interest costs on your chattel mortgage.
A chattel mortgage is generally a fixed interest loan with a one-to-five year loan term, and is generally secured by the vehicle or equipment you are purchasing. As with a hire purchase agreement, you may choose to make a balloon payment or lump sum payment at the end of the loan term, reducing your ongoing repayment amount.
With leasing finance, a leasing company takes ownership of vehicles and equipment and then leases them out to your business for an agreed repayment amount and term, usually two to five years. Leasing finance may be ideal when you need vehicles or equipment that have long effective lives.
As a leasing finance agreement is a fixed rate, fixed term contract, it has the benefit of enabling you to effectively plan your finances over the leasing finance period. Lease payments are also usually tax deductible and you should be able to claim the GST proportion of your payments for tax purposes.