Business finance has changed significantly over the past decade. There is now a wider range of Specialist Lenders who provide finance solutions to business owners.
The following are 5 types of business loans that don’t need property security:
- Unsecured Business Loan
- Cash Flow Finance
- Invoice Finance
- Equipment Finance
- Trade Finance
I have outlined the key features of each of these loan types below:
Unsecured Business Loans
Unsecured Business Loans also includes overdrafts, lines of credit and fully drawn loans.
They are offered by major Banks and a wide range of other Lenders.
Unsecured business loans can be typically accessed by established businesses with a sound-track record.
Unsecured Business Loans cost more than a secured facility and may come with balance sheet and profitability covenants that you will need to meet on an ongoing basis.
Cash Flow Finance
This type of financing is being offered by an increasing number of Lenders:
- What you can borrow is may be linked to your monthly turnover
- It is more expensive than traditional forms of finance
- Terms typically range from 1 to 5 years
While Lenders policies vary, in general, you must have been trading for at least 18 months, be an Australian citizen, and hold an ABN. Minimum turnover thresholds also apply.
Invoice Finance
Invoice Finance is a great way for businesses to access finance, if they have a quality debtor book and sound invoicing and collection processes.
Approval is usually granted within 48 hours, and you can typically access up to 80% of an invoice’s value within 24 hours of it being issued.
Invoice Finance works well for growing businesses because the facility can increase in line with your sales. Businesses in fast growth mode often find traditional facilities lack the flexibility they need.
Equipment Finance
Equipment Finance is another type of business loan that doesn’t need property security as the loan is secured by the equipment being financed.
Terms typically range up to 7 years and can include a Balloon payment at the end of the contract. Both the interest rate and repayments are fixed which makes budgeting easier.
Using Equipment Finance can preserve precious cashflow to fund daily operations and growth.
Trade Finance
Trade Finance is another option to consider that doesn’t need property security.
It allows you to pay suppliers for stock, raw materials, inventory etc on extended terms – allowing time for the goods to be received and turned into cash.
Trade Finance can be used to pay both local and international suppliers.
Whilst lender requirements vary, to qualify, you will need to demonstrate a sound track-record, proven experience in importing or exporting and have robust internal processes.
Summary
According to September Xero Small Business Insights Report, “half of all payments made to small businesses are paid late”. The Report outlines reasons for the late payments, rising expenses, supply chain disruptions, higher input costs and more.
For business owners this leads to cash flow stress and limits the ability of businesses to fund their daily operations, invest and grow.
In the past, if you didn’t have property security, accessing business finance was a difficult and drawn-out process.
Today business owners have more options available.
While each of the options outlined cost more than property secured lending, most businesses prioritise access to finance over price.
The key is to match your needs to the appropriate type of financing to ensure that it works for your business.
At The 500 Group we specialise in arranging finance for business owners and can help you access highly competitive finance structured to your circumstances.
If you would like to learn more, don’t hesitate to get in touch.
