Reasons for seeking finance

To help you get started, below are a number of common reasons for seeking finance as well as some finance options available:

Cash flow fluctuations

Although cash flow is one of the most common reasons businesses seek finance, you should carefully analyse your cash flow before considering finance. This will ensure the fluctuations are not caused by poor cash flow management. Some of the finance options include:

  • Overdraft facility
  • Line of credit
  • Fully drawn advance
  • Factoring
  • Invoice financing
  • Loan/cash flow lending
  • Trade credit from suppliers
  • Credit card (caution should be taken with credit cards and they should be used to fund very short-term working capital needs.)

Property

Depending on your business situation, you may require property for a shop front, factory, or to house inventory. It's useful to consider whether a purchase or a lease would better suit your business before you decide on finance. Some finance options include:

  • Loan
  • Fully drawn advance
  • Venture capital
  • Leasing

Vehicles

Whether you need one vehicle or a whole fleet, there are a number of finance options available. Before you choose a finance option, it's also useful to decide whether a purchase or a lease would better suit your business. Some finance options include:

  • Loan
  • Hire-purchase
  • Chattel mortgage
  • Trade credit from suppliers
  • Leasing

Machinery, equipment and tools

There are a number of finance options available to purchase or replace machinery or equipment. However, before you decide it's useful to investigate whether a purchase or lease would better suit your business. Some finance options include:

  • Hire-purchase
  • Chattel mortgage
  • Fully drawn advance
  • Leasing

Inventory

You may require finance for the purchase of inventory if it needs to be paid upfront or has an extended delivery date. If your inventory is for resale, it might be worth asking larger clients to pay a deposit to help alleviate your finances. Some finance options include:

  • Line of credit
  • Commercial bill

When starting your business

Whether you're starting a business from scratch or purchasing an existing business or franchise, there are a number of finance options available. Some finance options include:

  • Loan
  • Fully drawn advance
  • Venture capital
  • Private investors such as business angels
  • Crowd funding
  • Own funding

Please note: Investors such as business angels and venture capitalists may expect some level of self funding/existing equity in the business before investing.

When growing your business

Obtaining finance can help you grow your business through improving goods or services, diversifying, expanding or franchising your business. Some finance options include:

  • Loan
  • Line of credit
  • Private investors such as business angels
  • Trade credit from suppliers

When exporting overseas

Another way of growing your business is by exporting overseas. As well as traditional sources of finance, there are also a number of government options available. Some finance options include:

Research & development

As well as traditional sources of finance there are also a number of government options available. Some finance options include:

Business survival

A need for finance can sometimes come from mounting debt or trying to survive during tough times. Before you consider further debt in this situation, consider first improving your financial position. Some of your options include:

Once you have done all you can, talk to investors or a lender about finance options to improve your situation.

What to do...

More information...

  • Visit the MoneySmart website for personal financial advice, free legal advice and counselling services.
  • Consult a finance professional or financial institution for assistance with financing your business.

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