How to Get Small Business Finance, Loan or Investor Funding

There are 4 essential steps to increase your success rate on how to get a small business bank loan or funding from an investor. Getting a much-needed business bank loan can be tough for small to medium-sized businesses. There are 4 steps you can take to increase your chances of getting finance for a small business through bank loan or funding from an investor.

Do you want to know how to increase your success rate in getting business funding from a bank or investor if your answer is yes then this video is for you do you know that a third of small business owners experienced having their bank loans rejected this statistic came from the funding guide report which was published in 2019 by australian small business and family

Enterprise ombudsman according to the article published by accountants daily in august 2020 more than one in four businesses have been rejected when applying for finance over the past three months the figure rose to 37 in regional australia the august 2020 census business index found that nearly 4 out of 10 businesses believed it was more difficult to secure lending

This statistic came from the article that accountants daily published in august 2020 if you want to avoid being part of these statistics watch this video until the end it is full of tips that will help increase your chance when you need to get funding from banks or investors over the next few minutes you will discover four essential tips these tips could help

To significantly improve your chance of successfully obtaining funding to assist in growing your business tip one i will discuss the five criteria that lenders use when they assess funding application for business tip 2 i will guide you through the four steps on how you can better prepare yourself and the business before applying for funding tip 3 i will walk

You through the 12 steps involved in having a comprehensive finance health checklist it will help to ensure your business is in good health for success tip 4 i will outline the business planning preparation and review process lenders and investors usually require a business plan before they could provide the funding the research information used in this video is

Mainly based on the australian small business and family enterprise ombudsman and scottish pacific business finance data some information also came from business.gov.eu which is an australian government website let’s begin tip one lending criteria knowing the lender’s criteria before applying for funding makes all the difference to your success rate in obtaining

Approval according to australian small business and family enterprise ombudsman bank lenders usually use the five c’s of credit it is used to determine if the business can pay back a loan depending on the applicant’s business need or financial position lenders may not require all of the criteria outlined in this video one capital lenders look at the borrower’s

Financial position including assets liabilities net worth and liquidity 2. capacity to assess if the borrower can repay the loan over a certain period of time lenders may calculate various ratios to determine it lenders may use ratios such as debt to income or servicing ratio which includes cash flow revenue expenses and other outgoings 3. collateral lenders

Reviews the security types that the business is providing it may include reviewing property land accounts receivable as well as their age location and various aspects of the security 4. character lenders will look at the business reputation and business owners reputation including their credit history lenders may consider various factors such as loan repayment

History general savings history tenure at their work and credit ratings file five conditions lenders will review how the borrower will use the money trading ratios and determine if they have security lenders take into consideration other external factors such as the state of the economy to determine the loan conditions to increase the chance of small businesses to

Secure the funds they need to prove their credit worthiness it involves working with advisors to get their business finance ready the advisors could help to produce a comprehensive business case for investment in pursuit of growth and success according to australian small business and family enterprise ombudsman businesses should consider professional advice as a

Business investment rather than a cost it is this mindset that can help your business to succeed the biggest barrier for small business growth is access to finance according to australian small business and family enterprise ombudsman getting the business to become finance fit before applying for funding makes all the difference to your success rate in obtaining

Loan approval there are four steps in the funding preparation checklist i will take you through the four steps to help you become better prepared when applying for business funding it will help to boost your odds of getting a business loan approved it may also assist in reducing your riskiness factor from the lender’s perspective step one part one review your

Business accounts and get it in order separate personal and business finances get into the habit of separating your personal and business finances early it will provide lenders and investors with a much clearer picture of your financial position part two tidy up the business financials and get it in order business owners should generate various financial reports

Such as a report that shows earnings before interest taxes depreciation amortization profit and loss balance sheet and cash flow statements separate any once off or extraordinary expenses lenders use these financial reports to assess if you can repay the funds borrowed part three financial commitments compile a list of all your financial commitments by having

All your commitments in a simple document where you outline all your commitments can help with funding applications part 4 check australian taxation office record check the australian taxation office record for your business to ensure everything is in order check that you are meeting all your obligations such as paying payroll tax on time part 5 review bank

Statements lenders look at bank statements closely ideally during the most recent six-month period there were no default payments accounts were not overdrawn and there was minimal discretionary spending on the bank statements step two prepare write review and update your business plan according to australian small business and family enterprise ombudsman it is

Recommended that you use a good accountant with strategic experience rather than only seeing an accountant a few times a year during tax time to receive some advice you need to be aware of the various factors that influence and affect the odds of getting your business loan approved according to reserve bank’s access to small business finance report published in

2018 around one in five australian small businesses reported finding it relatively difficult to access finance i will walk you through the importance of having a business plan i will outline how you can have a good business plan to boost your chances of getting approved for a business loan part one show clear goals it helps lenders investors and you to clearly see

Your goals and achievements a good business plan outlines goals and the actions required to reach those goals the plan should be a living document that shows the business progress it should include market analysis historical financial performance against forecasts and future periods financial forecasts part 2 financial reports include profit and loss statement

Balance sheet and budget reports part 3 cash flow forecast prepare a cash flow forecast then compare what you said you would do against what you achieved it should include a cash flow statement comparing actuals with budget and forecasts the historical statement should capture the seven cash drivers namely revenue operational expenses overheads debtors creditors

Inventory and gross margin part 4 debt servicing when servicing a debt use the budget and cash flow statement to determine the business break-even point it is useful to assess what it costs for the business to remain operational what revenue the business must generate to turn a profit and what cash is available to service the debts step 3 finance fitness check

And credit worthiness assessment it is important to find the right financing solution based on your circumstances it is necessary that your advisor assesses your financial position and your business situation part one get a credit report there are online providers who can supply credit reports for free the report shows personal property securities register

Information it may include old and expired equipment leasing data which the applicant can update part two create assets list many business owners may feel that they have nothing to use as security by having a list of every piece of equipment tools and furniture you have can all add up part three online reputation lenders can access so much information about you

And your business including social media such as facebook be aware that lenders may look through the business website business facebook page and the business owners personal social media activities it is a way the lender is able to assess one of the five c’s namely character of the business owner part four tidy up issues before seeking any funding tidy up any

Outstanding issues it will help to give yourself the best chance of obtaining approval part 5 multiple finance applications when you have multiple finance applications it can negatively impact your credit rating part 6 credit rating an australian taxation office check your personal credit rating business credit rating and your australian taxation office portal to

Ensure everything is in order this is important to avoid any surprises when the lender checks your credit history part 7 personal property securities register review carefully review the personal property securities register by doing a register search as lenders will check it it is important to review it and your advisor can help you do this prepare a statement

Showing the reason for any registrations any out of date or incorrect entries can impact the business credit application it can also limit the security you can offer to another lender if you are applying for additional finance all out a date registration should be corrected it will help give an accurate picture of the business you may seek legal assistance as

Required to rectify any issues in the report your advisor can help correct it step four assess if you need funding to find the right financing solution based on your circumstances it is important that your advisor assesses your financial position and business situation to determine the different types of funding options that are appropriate for you will depend on

Your situation it depends where the organization lies within the business life cycle and what is important to business owners at the time part one funding requirements if you require some funding having the right type of funding for your situation can really make a difference to achieve business growth in some instances it may be difficult to solely rely on sales

To achieve success part two business needs determine your business need depending on your needs you may consider to borrow seek funding from investors or self-fund your business operational requirements part three cash urgency needs assess if you require urgent cash to address a short-term issue in your business determine if you require some funding instead

Which allows you to meet your needs for the ongoing operations of the business part 4 debt service ability determine if you can service the debt when assessing the serviceability of the debt it is not only taking into consideration the funding amount it should be the total cost including fees and charges part 5 mental health matters your mental health matters

The state of your mental health is critical to the success of your business to give you some peace of mind it is important to have a business plan and the appropriate funding in place part six giving guarantees understand what giving a guarantee means for secured and unsecured loans i will outline the 12 steps involved when going through the finance health

Checklist i will walk you through the checklist to ensure your business is in good health for success it is important to get your business finance health check to ensure you remain financially fit it will help you to stay on track and be in good shape to successfully achieve your company’s goals and business plan objectives before applying for funding go through

The finance health checklist it will help to improve your success rate in getting your funding application approved step one get business accounts in order step two create or update the business plan step three review the balance sheet and profit and loss reports step four create monthly cash flow forecasting step five clean credit rating history file step

6 check the personal property securities register step 7 sort out australian taxation office affairs step 8 lodge the pay as you go and business activity statement on time step 9 understand your business needs step 10 assess if you require business funding step 11 decide which funding option best suits your business needs step 12 you are ready to apply for

Funding in this business planning section i will take you through the tips on how to create update and review a business plan it will help you to remain on track in successfully obtaining funding and to meet your business goals business planning is an ongoing business activity as your business changes many of the strategies in your plan will need to evolve

To ensure your business is still heading in the right direction by having your business plan up to date it can help in keeping you to remain focused on where you are heading you can make further adjustments to the plan as your business objectives changes it will help to ensure that you are ready when you need to adjust your company’s strategies and whenever you

Require business funding in the future a business plan provides direction keeps you on track and usually a requirement when you seek finance depending on your business type your plan could include the sections outlined in this video part 1 business summary a one-page overview should be written after your business plan is finalized part two about your business it

Is usually referred to as management plan or operations plan it covers details about your business including structure registrations location premises staff and products or services part three about your market this is the marketing plan it should outline your marketing analysis of the industry you are entering your customers and your competitors this section

Should also cover your key marketing targets and your strategies for delivering on these targets part 4 about your future this section covers your plans for the future and can include a vision statement business goals and key business milestones part five about your finances the financial plan includes how you will finance your business costing and financial

Projections according to business.gov dot a u get some help if you are not confident in completing the business plan yourself you can seek the help of a professional such as a business advisor or accountant who can look through your plan and provide you with advice part six determine who is the business plan for does your business plan have more than one purpose

Will it be used internally or will third parties be involved deciding the purpose of the business plan can help you target your answers if third parties are involved what are they interested in do not assume that they are only interested in the finance part of your business they are likely going to look at the entire business as a whole part 7 taking on a mentor

Or a business coach participating in mentoring or coaching programs can help you to develop a greater understanding of business processes and practices it can help to provide you with the skills you need to grow and improve your business our done-for-you business planning service is based on proven methodologies and award-winning cloud-based software tool it

Can help eliminate manual processes and key person risk in your organization increase data transparency among your teams and create more efficiencies within your business click on the link in the show notes to download the free business funding essential guide which includes free business funding checklist to find out how we could help you reach out to us today

For a no obligation free consultation click on the contact us link in the description to book a time disclaimer this guide is not intended for use as a source of legal business accounting or financial advice all readers are advised to seek services of competent professionals in legal business accounting and finance fields the information in this video is for

Educational purposes only if you like this video share the love by giving it a thumbs up hit the subscribe button and the notification bell to receive more like it in the future thanks for watching it’s

Transcribed from video
How to Get Small Business Finance, Loan or Investor Funding By Dynamic Zenergy