Small- and medium-sized enterprises (SME) are major employers and drivers of economic growth. Australia’s 2 million SMEs employ almost 70% of the workforce. SMEs account for over half of the output of the private sector and tend to be a major source of innovation in the economy.
Small business entrepreneurs will often use their families’ finances to fund their business. Some seek external funding, which can include extra equity or debt from family and friends, debt from financial institutions, or equity from venture capital funds. Banks’ business models and expertise are more suited to providing debt finance to established businesses, whereas venture capital is more suited to start-up firms.
Large businesses have access to the main financial sector for their funding. SMEs have the same access but their success rates in getting fiancé approval is lower. Interest rates on SME loans also tend to be higher than those for large business loans and mortgages.
Loans to businesses generally fall into two categories:
Secured lending against bricks & mortar (ie. property).
Cash flow lending, underpinned by the ongoing performance of the business.
These loans might be required for anything from acquiring a business, purchasing a new asset, renovating facilities or process improvements.
David Murray of Murray Home Loans spent more than 12 years in business banking prior to becoming a mortgage planner & broker. In this time, he worked with companies as large as Woolworths and Wesfarmers down to small family businesses. He has assisted established businesses, management buy-outs and newly formed businesses. Each of these requires different skills, but the fundamentals remain the same – understand the underlying business and ability to service and repay the loan.
If you are seeking a small business loan, talk to Murray Home Loans. We can discuss the different business loans and providers to find the loan that will be best suited to your business.