Often considered high-risk borrowers by traditional banks, it’s no wonder startups turn to alternative lenders to get their small business off the ground.
Did you know, according to a 2020 Australian Small Business and Family Enterprise Ombudsman report, a whopping 98 percent of all businesses in Australia are considered small business? This equates to about 32 percent of the country’s total economy. And yet, despite being so crucial to our economy, traditional banks and lenders remain reluctant to lend to startups.
With the Australian Bureau of Statistics (ABS) reporting a 7 percent increase in the number of businesses in 2021-22, there will always be startups looking for funding. So what are some common reasons Strive Financial lends to new Australian businesses?
Funding for initial operations
A startup often needs finance for initial expenses such as equipment, inventory, marketing, and rent, as well as wages for employees.
New technology investment
To be competitive, a startup is going to need to invest in new technology, such as hardware, software and cyber security. A business loan can provide the funds needed to make these critical investments.
Emergency expenses
Ideally, every small business should have a healthy contingency fund as unexpected expenses can pop up at any time. It may be a broken piece of equipment, unexpected repairs or inflation impacting your calculations.
Expansion and growth
As your startup grows, you may need to invest in more – or better, bigger or heavier -equipment, especially if your business takes off. And a medium-term business loan can be put to good use buying more inventory, scaling up your marketing or bringing on more people to cope with the business growth. Now, if you’re really shifting up a few gears and expanding to a new or second location, a long-term loan might be just what your business needs.
Cashflow
It doesn’t matter if you’re the newest kid on the block or an experienced old-timer, if you haven’t got your cash flow sorted, you may be headed for trouble. Cashflow is the lifeblood of any business and, as any small business owner can tell you, it takes just the smallest of hiccups somewhere along your supply chain for a cashflow bottleneck to develop. Which is bad news for you, your suppliers and most importantly, your customers. So jump on it quickly to keep your new business thriving.
Seasonal fluctuations
Depending on your business, you may experience fluctuations in demand for your products or services during the year. A business loan can help bridge the gap during quiet periods, ensuring your business has the cash flow needed to stay in operation.
Why is borrowing from traditional lenders so tricky for startups?
A startup asking for finance from traditional banks may be challenging, due in part to startups typically having limited or no financial history as a business. This makes it hard for banks to assess their creditworthiness. With 167,646 new businesses opening in 2021-22, it stands to reason that a significant number will need finance of some kind. Many will seek alternative sources of finance, such as Strive Financial, because alternative lenders are more willing to lend to startups and small businesses that may not meet traditional lending criteria.
Whatever your reasons for needing a business loan, it’s important to chat with the specialists. If you’re not sure what you need or for how long, start by playing with some numbers in our handy online loan calculator. Then give us a call or shoot us an email and you could be looking at your new business loans funds sitting in your bank account in less than 48 hours.
When it comes to business, cashflow is critical to success. This means having access to cash when you need it to buy stock, pay employees and cover regular bills and expenses. That’s why a small business experiencing cashflow issues – no matter how temporary – can quickly become a big problem. But what if you have the cash, it’s just tied up in your home? That’s an easy fix – you can apply for a short term loan secured against a property.
In other words, you can take out a second mortgage on your home.
$770,000 is a lot of money in anyone’s language. Now just imagine being the client who, through no fault of their own, was suddenly looking at the very real possibility of losing this much money just days before Christmas. Yes this story does have a happy ending and yes Strive Financial did step in to save the day. But we’re getting ahead of ourselves…