Starting a business can be a very challenging decision, not only will you typically have to step out of your comfort zone, you will almost certainly need some form of funding to assist with setup costs, capital, stock, etc.
Security for a business loan
A business loan, like most loans will need some form of security, which is typically residential or commercial property. In some instances, if you are buying an approved franchise some lenders will lend against the franchise name.
Business lending is heavily reliant on risk and there are many factors that will determine and impact these risks, and can have a very big impact on the lenders decision. Suggestions to help mitigate some of the main risks are:
- providing a good asset as security for the loan, preferably residential or commercial property
- spending time completing a detailed business plan covering SWOT analysis and accountant prepared cash flow forecasts
- a resume detailing previous industry experience and/or qualifications
- if you are purchasing an existing business have the previous financial history of the business reviewed by your accountant
- having a strong current asset position and a remaining form of income will provide more strength to an application for finance
Business loan interest rates
Depending on the security, business loans usually have a higher interest rate to residential home loans, which is determined by the risk margin imposed from the assessment of the application.
Planning for this transition is paramount and at Simplified Finance Broking we can assist with this process with a specialist from our team and can put you in contact with our preferred partners where necessary.