The steps businesses should take to secure financing.
Securing equipment financing is often a key undertaking for small businesses seeking to expand and streamline their operations, and in seeking out a financial product that will cater to your specific needs there are a number of factors to keep in mind and steps that can be taken.
As previously looked at in this series, small businesses have a range of options when it comes to equipment financing, and it is important to do your research in determining the type of financing that will best be suited to your business.
Meanwhile, being prepared is a key to securing equipment financing, and good business practices, underpinned by comprehensive and clearly outlined financial information, along with detailed future projections and goals, can support a successful application.
GOOD BUSINESS PRACTICES HELP SECURE EQUIPMENT FINANCING
Of course, good business practices should be viewed as complementary to securing equipment financing, supporting efficient operations, and ensuring that the right structures are in place for a business to grow. In turn, businesses will better be able to both identify and prioritise their requirements, and will be able to approach critical business decisions, including decisions about equipment financing, in an informed manner.
As advised via the business.gov.au website, business seeking out a loan should keep in mind the following:
• Financial understanding – putting together a cash flow statement can help provide insight into the money going in and out of your business, including current income, net profit, expenses and future projections
• Prepare a business plan – lenders will likely want to see a business plan, providing insight into both a business’ financial situation and goals
• Knowledge of financial limits – work out your limits for finance and ability to repay money borrowed, assessing a range of factors, including if you need the money upfront or on a needs basis, the maximum repayment you can afford and your loan-to-value ratio
• Choose a loan type – assess the costs, interest payments and any hidden charges or terms associated with different financial products (with it worthwhile shopping around, and consulting with a business adviser or accountant)
• Prepare paperwork – have at the ready documentation including proof of identification, your business plan, main financial reports for the previous three years (if available) and financial forecasts (compiling this into a report will look professional)
• Check credentials – registered companies can be searched for on the Australian Securities and Investments Commission professional registers
• Expert advice – practice answering financial questions to help build confidence, or bring along a business adviser or accountant to help you. Further information can be found at the business.gov.au website.
A COMPREHENSIVE UNDERSTANDING: EXPLORING BUSINESS OPTIONS
In seeking out equipment financing, it is important to weigh up your broader business requirements, and as Finlease Founder and CEO Mark O’Donoghue previously told ACM, “a good broker should be doing more than just organising money”.
By way of example, Mark highlighted the federal government’s instant asset write-off, which last year increased and expanded in the wake of the COVID-19 pandemic (subsequently introducing temporary full expensing).
For many businesses weighing up the various choices available, it may well be worthwhile engaging an expert in seeking to gain a wider perspective on equipment financing and business options.