Your Local Brokers Baseline Finance
Your Local Brokers Baseline Finance
Applying for finance can feel daunting. What will the bank want? Will I get the funds? Where do I even start? The good news is that it’s often easier than you think. The bad news? Many business owners make simple mistakes that complicate their chances of success.
Here are the most common ones, broken down one by one.
Securing funding is easier when you know what not to do. These are the red flags lenders notice first.
Lenders need to assess the ongoing profitability and viability of your business. Whilst it’s not a perfect system, the best way for them to do this is by reviewing your historical performance. Judging your ability to repay based on three-year-old financials isn’t going to work. It’s critical to have recently prepared financial and tax returns before kicking this process off.
What structure will be used for the borrowing or asset purchase? Accountants do God’s work at the best of times, but this is where they really shine. Things to consider include the most tax-efficient vehicle (company, trust, individual/sole proprietor) and asset protection (are these assets at risk if the business goes into administration or is sued?).
There’s no “one size fits all” here — the best outcome almost always stems from a robust conversation with your accountant.
This is a trap many small businesses fall into. Legally, assets owned in a company or trust are not the owner’s and can only be accessed if granted as a dividend or distribution. Using business funds for personal use isn’t ideal.
Not only does this complicate the assessment process for lenders, but it can also point to limited financial acumen or signs of stress for the owner. On top of that, your accountant will likely spend significant time unwinding the mess.
Business is wild. There are demons around every corner, and only the strongest survive. That means you’re likely to incur costs that are not ongoing. Did you suffer a bad debt? Did a fire burn down the warehouse and force you to rent premises for 12 months? Or maybe you’re no longer renting at all because you’ve now purchased your own premises?
A good broker or lender will look for outliers in your financials and ask questions, but they’ll never have the same level of knowledge about your business that you do. One-off items can often be excluded from assessments — but only if you’re proactive in explaining them.
Unless you’re sourcing funds from your local loan shark, you’ll know most lenders want to lend money to someone in a strong position. That’s why it’s important to forecast ahead and get as much visibility of your future runway as possible. It’s always easier to source finance when you’re in a good position.
Seeking additional funding to pay wages tomorrow, or when your business’s survival is on the line, is a massive red flag. There may still be solutions, but they’re often expensive, punitive, and should be treated as a last resort.
One of the sayings I’ve really come to appreciate is: “you don’t know what you don’t know.” That’s where experts and specialists add real value. You’d expect your real estate agent or buyer’s agent to know more about property than you. You’d expect your accountant to be more up to date with tax laws than you. And you’d certainly hope your broker outshines you when it comes to finance options.
Lean on the experts. The wrong decisions can cost a lot of money. Penny wise can quite literally be pound foolish.
The ATO has bankrolled a lot of small businesses across Australia for a few years now, but in recent times the gloves have come off. The ATO is becoming far more aggressive in pursuing debts.
While some lenders are now open to working with clients who have ATO debts, it’s still viewed negatively. Worse still, once you’re in the cycle of owing money to the ATO, it becomes very difficult to get out of it.
Applying for finance doesn’t have to be a battle. Most of the mistakes above come down to preparation and timing — things you can control with the right help. At Baseline, we sit on your side of the table, making sure your story is presented in the best light and your options are clear.
Whether you’re looking to buy a commercial property, expand your business, or simply sharpen your cash flow position, avoiding these mistakes could be the difference between a “no” and a “yes.”
If you’re planning to apply for finance this year, now’s the time to get ahead of the curve. Let’s chat.
The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.
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