For many Australians, the new year is the time to get a handle on their finances and plan out the months to follow, with borrowing often being high on the agenda for small business owners.
Below are 5 questions to ask your client to help them find the right funding for their business growth.
1. What do you need the extra capital for?
In other words, why do they need a loan? It seems like a straightforward question, but it’s often overlooked by borrowers looking for extra capital. Articulating loan purpose will help answer some of the other questions you’ll need to ask.
Your client’s loan purpose will help you identify whether they’re trying to fill a short- or long-term need. For example, the financing needs of purchasing quick turnaround inventory differ from those associated with expanding to a new location – in another example, it might not make sense to borrow with a four-year or five-year term to pay for inventory that will be sold in a month or two. The key is to match the term of the loan with the life of the asset you’ll purchase with the loan.
2. How much money are you looking for?
This is another pretty straightforward question. It’s not unusual that, when asked how much they’re looking for, a borrower will reply with “as much as I can get”. However, this answer tells a potential lender that you haven’t really thought through your loan purpose. Your loan purpose should drive the answer to this question.
Determining the amount of money your clients need can also help you determine which lender to approach. Over the last several years, many traditional lenders may have moved upstream, looking for bigger business from larger loans. Banks, for example, would often rather lend $500,000 or $1 million, compared with $50,000. Both amounts carry about the same administrative and regulatory costs associated with underwriting the loan. However, in Australia, the alternative online lending market continues to grow, meaning even more options for small businesses when it comes to small business loans.
3. How quickly do you need the funds?
Some loan purposes don’t allow the luxury to wait for several weeks to gain a loan approval. Depending upon the lender, it could take anywhere from a day, to a few weeks – or even months. With , your client can receive a decision and funding in as fast as 1 business day.
This means your client won’t have to worry about wasting time waiting for funds, and instead they can get on with growing their business.
4. What kind of loan term would fit your business need?
Once you’ve identified your loan purpose, you can determine whether or not you’re looking for a short or long term loan. In the same way most consumers wouldn’t purchase a new car with a 30-year auto loan, you can quickly determine if the loan terms are right for your situation. There are lenders that offer exclusively either short or long term loan options. So, if you’re interviewing a lender who doesn’t offer the terms you’re looking for, you’ll recognise it. Our loan terms range from 6-24 months.
5. What payment schedule works best for you?
The advent of daily, weekly and monthly periodic payments is a departure from a more traditional payment approach. Nevertheless, many lenders (including online lenders) have adopted a more-frequent-than-monthly payment schedule for several reasons. Not the least of which is that it tends to smooth out the cash flow burden throughout the month, rather than the traditional cash flow drain associated with a single lump payment per month.
If the lender requires a daily or weekly payment schedule, it’s important to make sure your clients business has consistent cash flow throughout the month. We offer weekly, or daily, repayment options – if your client chooses daily repayments, their first repayment will be due the following day. If they choose weekly repayments, the first repayment will be due 7 days after receiving the funds.
