With every end of financial year (EOFY) comes advice, advertisements and sales encouraging businesses to make purchases that will yield tax deductions. For many organisations that means getting a business loan so they can complete the purchases before EOFY is over. But what about afterwards, when the new financial year begins?
It’s time to make decisions and plans. Maybe this is the year they expand, start an advertising campaign or hire temporary staff for the busy season. Perhaps they want to be ready for unexpected expenses or get ahead of tax debt. Perhaps they are in need of assistance with inventory financing or cash flow.
The fact is, there’s a real opportunity for brokers to advise and support small businesses at the outset of a fresh financial year. Here’s how!
Four tips to kickstart the financial year with a small business loan
Tip #1: Plan ahead to offset this year’s tax debt
Perhaps your small business clients were able to take advantage of EOFY sales, making business purchases that are eligible for deductions to offset this past year’s taxes. If not, remember – appropriate purchases in the new financial year will also be eligible for tax deductions. In fact, now that the EOFY period has passed, time is once again on everyone’s side.
There is time for due diligence and comparison shopping for the products and services they need. Of course, they’ll need to ensure they’re making purchases that are legitimately tax deductible.
You can help: Source and compare potential lenders that can provide the cashflow assistance they require.
Tip #2: Prioritise loan applications before tax returns
It’s never too early for a small business to undertake tax planning, especially if they are expecting tax debt. And of course they should submit their tax return on time. However it is critical to understand that once a small business has a tax debt on the books, lending options become more limited and many banks will turn them away.
You can help: When seeking a loan for a small business client, the trick is to secure that loan before their taxes are due.
Or you can assist them to obtain a short-term, small business loan to cover their tax debt now, putting them in a good credit position so you can help them secure longer term, larger-scale financial support for their business.
Tip #3: Understand small business Loan options
Although banks may offer competitive rates, they have requirements that can be tough for many sole proprietors, start-ups and small businesses to meet, such as:
But there are alternatives, such as reputable and responsible online and short-term lenders.
You can help: Advise them to get themselves organised, take stock of the status of their business and figure out what documentation they can pull together. Ask them whether they have equity to bring to the table. Then you can help them identify their particular needs and find a lender that fits.
Tip #4: Find a lender that will listen
Certainly you’ll want to find an experienced lender that specialises in small businesses and has designed loan options that solve the problems that they typically face. Perhaps you’ll want to find a lender that supports business clients that have been operating for less than the two years that banks typically require. You might also need a lender that accepts fewer documents and doesn’t require collateral. Rest assured they exist!
Online application forms are great, and you definitely want a quick turnaround on the approval decision as well as quick access to the funds for your clients. Plus you should be able to expect a quick turnaround on your own commission. But if the online form is backed by an algorithm that says “No” much more often than it says “Yes”, you may not get the outcome you’re looking for on behalf of your clients.
If the small business owner has a lower credit score, needs an unsecured loan and / or has outstanding tax debt, our top tip is to find a lender that will actually listen.
You can help: Find and work with a lender that lets you talk to a real loan officer who will take the time to understand the business owner’s situation and their potential to pay back the loan in good time.
Don’t believe the naysayers. Yes, it can be tough for small businesses to find funding, but there are lenders out there that can help brokers offer support to small businesses.
There are a small number of alternative lenders that offer solutions for small businesses that have outstanding tax debt, even when a business owner cannot provide a home or commercial property as collateral. There are lenders who offer personalised service, assess each application on a case by case basis and help small businesses realise their goals.
Olly Guilleaume is the national manager and business loan specialist for Limba, one of Australia’s most experienced small business lenders. He works with referral partners and brokers to find solutions to the financial dilemmas facing Australia’s small businesses, and to support their business growth and sustainability objectives.
Olly has more than 20 years’ industry experience, spanning credit control, broker management and business management, including senior executive positions at Suncorp and Bankwest.
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