Business Finance Archives - Winquote SME Finance

Securing finance in the next 90 days

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With the significant changes to how responsible lending is tested by the lenders, the burden of being sensible in the way perceived risk is mitigated is now put on the borrowers and/or their appointed brokers.

The lead questions on the online platforms such as ebroker highlights the primary risk assessments as it tries to match Credit scenario to Credit Providers and qualify the opportunity.

Even responses to a simple question such as “when do you need the funds by?” could have risk implication.

Business owners can’t be sloppy anymore with their finance applications. Credit enquiries are recorded and who they borrowed the funds from can be a red flag.

Our recommendation is that any finance application should not be rushed, but rather, be well prepared with the goal to achieve the best results in pricing.

This would require having up to date business financials, including aged debtors and creditors listings, and a business summary, which should include commentary on a second way out for the Lender.

A drill down on the risk aspect is the best way to negotiate for better pricing.

Traditional brokering in the SME space is no longer about sending in an application and hoping for approval.

In today’s market brokering is about presenting the loan proposal with well-documented credit risk mitigation and credit assessment attended by the broker so the right Lender or funder is selected.

Hence, approval is secured in a timely manner with the least footprint of credit reporting.

At Winquote we take this one step further. We will not just find you the most appropriate solution for you current funding requirement but have a strategy to exist over time to the lowest funding costs and introduce you, the client, to bankers that understand your business.

If you would like us to review your finance options  and assist to secure funding to grow your business then please call us on 1300 971 308 or email info@winquote.com.au

property hurdles winquote

Overcoming the five biggest hurdles to gaining property funding

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The onset of the Global Financial Crisis has meant that borrowers now face significant hurdles in obtaining funding for property transactions. This new lending environment has seen Australia’s Big Four Banks tighten their purse strings, making it much more difficult for property investors to secure loans. Five hurdles stand out above all others with respect to property investment, however there are proven strategies for overcoming them.

1. Beating the loan to value ratio

The majority of Australian bank and non-bank lenders will demand a loan to value ratio of 80% for an investment property loan. This means that you will have to stump up a larger deposit in order to secure a loan. Lenders Mortgage Insurance (LMI) offers you the chance to purchase an investment property at a higher loan to value ratio of say 95%, however you can expect to pay thousands of dollars for LMI over the course of your loan.

2. Poor credit history

Recent changes to Australia’s credit reporting regime that took effect in 2014 have made it much easier to ruin your credit history. Every time you apply for an investment property loan, lenders will scrutinise your credit history. A poor credit history could mean that banks view you as a credit risk, leading to a higher interest rate on your loan. To overcome this, keep a very close eye on your credit card bills, in-store finance and personal loans. Also, assess your credit history annually and be sure to fix any discrepancies as they are identified.

3. Location, location, location

Choosing the right property will set you well on the way to achieving a higher LVR for your property. Lenders, like investors will be far more sympathetic if a property is close to public transport with a strong rental market and two bedrooms or more. Properties that are located in far-flung locations or are too small will not curry favour with lenders.

4. Diminishing rental returns

Finding the perfect property in the right location is only half the battle. Lenders are far less generous when it comes to considering the value of your rental income. If you’re applying for your third or fourth investment property loan then expect the banks to consider only as much as 75% of the value of rental income. The way to overcome this is to ensure that you are charging the full rate of rent for your existing properties through yearly reviews. It may also be possible to increase your disposable income to entice the banks further.

5. Fewer lending options available in the market

The number of small-scale lenders and diversified lending products (i.e. lo doc loans) active in the marketplace has dramatically fallen post-GFC. This has led to less competition and more stringent requirements among those that remain. Obtaining finance from fewer sources and product variations has allowed lenders – particularly banks – to only deal with investors with a proven track-record. To overcome this, it makes sense to engage the services of a financial specialist. Winquote specialises in helping self-employed individuals and SMEs secure the right loan for an investment property.

Building business credit

Why You Should Consider Building Business Credit

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It’s common practice for rookie entrepreneurs to bankroll their business ventures using a combination of savings and personal credit. What’s surprising—and worrying—is that not all business owners make the transition to business credit once they get the ball rolling. Business credit is hands-down one of the most valuable assets your company can have. As is the case with personal credit, it offers a reflection of (a) your trustworthiness as a potential borrower and (b) your past payment behaviour. For all practical purposes, it makes up the entirety of your company’s financial foundation. The importance of building business credit is the same regardless of the size of your business—even micro-businesses that pull in less than $250,000 a year aren’t exempt.

Below are four reasons why you need to build business credit (starting yesterday).

1. Basic financing

It’s difficult for a company with little to no (traceable) commercial credit history to obtain access to financing. And start-up, day-to-day operations, expansion, you name it—every stage of every business’s life cycle is funded at least partially through credit. So the short answer to why business credit matters is this: you’ll be hard put to survive without it. As of 2012, Dun & Bradstreet has credit information on more than 10 million businesses, not to mention more than 1.05 million unincorporated entities. And that’s just counting Australia. Why do they bother putting together this information? Because lenders need it. If you visit the D&B homepage, this graphic is the first thing you’ll see:

businesses filing for bankruptcy

That very fact is the reason why businesses like Dun & Bradstreet, Equifax Commercial, and Experian Business Credit exist. Lenders want to make sure they’ll get their money back (with interest), and one way to guarantee that is to lend only to low-risk entities. And you’ll need a business credit profile to prove that you’re low-risk.

2. Business partnerships

Lenders aren’t the only parties with a vested interest in your credit score. Suppliers, manufacturers, distributors, utility companies, and other vendors are in the same boat. And all of them will pull business credit on you to know whether or not you’re the type to renege on your bills.

3. Risk management

Business credit doesn’t just mitigate risk for lenders and business partners; it also protects the owner. Remember the graphic above? If you financed your business using personal credit, life savings, and/or money borrowed from family and friends, you will be in a difficult position if your venture goes belly-up. Business credit is designed to limit your liability as a business owner, and not just financially. Ensuring that your business is recognized as a separate entity with a separate credit score will give you a measure of protection in the event that your business goes bankrupt or is involved in a business lawsuit.

4. Scalability and transferability

Business credit will come into play if you’re thinking of expanding or selling your business. You’ll need it if you want to finance a delivery vehicle, lease equipment, sell your products via retail chains, or hire a contractor to renovate a new office space. Likewise, your credit portfolio will matter to prospective buyers because it is central to the business’s future outlook. The better your business credit looks, the better your chances are for expansion and/or a profitable sale. Building business credit takes time, but it could make or break your company. Think of it as the difference between a rookie going to a job interview with little more than a cover letter versus another who goes in armed with a full resume, up-to-date references, university transcript, and portfolio. It’s one thing to know that your business has what it takes to succeed; it’s another thing entirely to prove that it does.