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LOANS TO HELP YOU GET DOWN TO BUSINESS

ik@ippei.com (Tori Klein) — Thu, 26 Dec 2019 14:56:38 GMT

In this article, we’ll look at short-term business loans – what they are, the benefits of using them, and common uses for quick access to funds for up to 12 months.

What is a business loan?

A short-term business loan in Australia is used for business-related purposes, such as investing in equipment, purchasing, improving cash flow, or debt consolidation. Short-term business loans can help smooth out the business’ financial ‘ups and downs’ or help you take advantage of opportunities to grow your business. Short-term small business loans are usually for $25,000 to $500,000, with a term of 3 to 12 months.

Why you might consider a short-term business loan

Short-term business loans can be used for a range of scenarios, including:

Business expansion: “It costs money to make money” is the old adage and growing a business is no different. Advertising, hiring new staff, expanding or renovating, are common costs associated with a growing business.
Inventory: Investing in inventory, including expansion and replenishment, can be tremendously beneficial to boost revenue. Though it’s often a double-edged sword as expensive purchases can hurt cash flow, especially when businesses have seasonal demand
Cash flow: Small businesses, in particular, have to deal with cash flow fluctuations when inventory is slow to move or customers are slow to pay
Equipment: Purchasing new equipment, or repairing/ replacing existing equipment, is often an unexpected (and hefty) expense that is required to keep the business moving .

The advantages of short-term business loans

A short-term business loan has many advantages, including:

Easy application process: Apply online for short-term business loans in Australia, with a relatively simple application process from a range of private lenders and fintechs.
Real-time access to funds: Once you meet the lending criteria and the loan is approved, funds can be accessed in as little as a few days.
Keep control: A short-term business loan ensures you retain full control with no external interference, which is often viewed as preferable to inviting investors into the business.
Temporary: Once the loan is repaid, your obligation ends. Whereas in the case of equity finance (investors), you have new shareholders for potentially a long time.
Tax-deductible interest: Payments are more manageable as the cost of funding business growth (loan interest expense) can be deducted from income generated.

Types of business loans

There is a range of short and longer-term loans available to businesses in Australia:

Term loan: Borrow a single lump sum to be repaid over an agreed period of time, with fixed or variable interest rates.
Line of credit: Access funding up to a certain amount that can be drawn down as required to help manage cash flow or pay an unexpected expense
Business overdraft: Attached to your business bank account, an overdraft allows you to overdraw up to a pre-approved amount
Business credit cards: Business credit cards are convenient, though it’s easy to be stung with high-interest rates if the card balance isn’t paid off in full each month
Equipment lease: Funds provided and secured against specific business equipment (or vehicles)
Invoice financing: Invoice financing, also known as invoice discounting or debtor finance, pays the business the majority of the customer’s invoice immediately, transfers the liability of a customer’s invoice to the invoice finance firm, then takes a percentage of payment once the customer pays the invoice

Key takeaways

If you own property, a short-term business loan is increasingly being considered as a way to obtain funds relatively quickly. You can apply online for a short-term business loan through a variety of lenders in Australia – particularly through private lenders and fintechs. This form of funding can be used for a short period of time (3 to 12 months) for a variety of purposes.

WHY NOW MIGHT BE THE RIGHT TIME TO GET A MORTGAGE

ik@ippei.com (Tori Klein) — Thu, 26 Dec 2019 14:56:38 GMT

In this article, we’ll discuss if now is a good time to get a mortgage, the importance of your particular financial situation and top tips to make the process easier.

What is a mortgage?

A mortgage is a form of debt that is secured against a specific piece of real estate or property. They are also known as ‘liens on property’ or ‘claims on property.’ Most new property purchases have a mortgage attached, especially for first home buyers.

Generally, a mortgage is a long-term loan – often for a duration of anywhere from 15 years up to 30 years. The term length is determined by several factors including the size of the loan, your income (or serviceability) and your age.

Less commonly known is that there are short-term mortgage loans , which are usually five years or less. A short-term mortgage is increasingly considered from private lenders in the absence of being able to secure a loan from a traditional financial institution, like a bank.

When is the best time to apply for a mortgage?

There are many factors at play when it comes to getting a mortgage. It’s important to balance finding the right property, having an adequate deposit (at least 20% is a good rule-of-thumb) and getting your finances in order. A deposit of 20% or more also helps you avoid paying Lender’s Mortgage Insurance (LMI) in many cases.

In the current climate, many borrowers are also refinancing – discharging their current mortgage and replacing it with another from a different mortgage lender at a better rate. If you are considering this option, look carefully at the transaction costs, which include any fees and charges your current lender may impose for early payout of your loan.

Top tips when you apply for a mortgage

Mortgage lenders will appraise your deposit (or equity in your current home), your income, other debts (credit cards, car loans, etc.) and your credit history when considering your eligibility for a mortgage. Unsurprisingly, the better your financial position, the more likely you are to be approved at the lowest possible interest rate. That said, there are an increasing number of lenders that provide mortgages to borrowers who don’t have all their paperwork in order, or who may have experienced credit history challenges. Consider these tips to make the process easier:

Have a good deposit: Save at least 20% deposit, or have that equivalent in equity in your current home.
Get your finances in order: Have your paperwork organised, including at least six months of bank statements, current payslips, last two years’ tax returns, details of any other loans, etc. It’s also helpful to have a clear view of your total household expenses.
Find out your credit score: There are major credit score providers who offer free consumer credit scores and reports that will help you understand your credit-worthiness in the eyes of mortgage lenders, who will access these reports when you apply for a loan.
Pay down debt: Less debt means you can borrow more and better service your mortgage loan.
Work out your budget and capacity to pay (service) the loan: You need to understand how much you can afford to pay each month in principal and interest. If an increase in interest rates will make it difficult to meet your repayment commitments, then consider a fixed interest rate loan.
Shop around for the best deal: There are many sources for mortgage loans that suit your requirements – that may or may not be with one of the big banks. Consider non-bank and private lenders, and keep in mind that mortgage brokers can do the shopping around for you, should you prefer.

Key takeaway

So, is now a good time to get a mortgage? As always, it depends on your personal circumstance. That said, many borrowers are taking advantage of historically low interest rates and high levels of competition from lenders trying to secure more customers.

SHORT-TERM LENDERS OFFER LONG-LASTING BENEFITS

ik@ippei.com (Tori Klein) — Thu, 26 Dec 2019 14:56:38 GMT

In this article, we’ll look at short-term loans – why you might need one, the benefits of using them, and the different types of short-term lenders in Australia.

Why you might need a short-term loan

You might have heard the saying “asset rich and cash poor” which describes a situation where you have good security, but lack of access to cash. A short-term loan can be a good solution meet temporary challenges and the ups and downs of cash flow in your business or personal life. Short-term business loans usually have a term of two months to 36 months. Common loan sizes are from $25,000 to $500,000.

Why you might consider a short-term personal loan

One of the most common forms of short-term personal loans in Australia is a bridging loan . As the name suggests, a short-term bridging loan essentially ‘bridges the gap’ between the sale of the original home and the purchase of the new house. As such, a bridging loan can be a good alternative when you need to act quickly to secure a new property and the settlement dates for purchasing and selling don’t match, which is often the case.

Less commonly known is that you can use a short-term personal loan to renovate or prepare your property for sale, or even complete a small sub-division. You might also use this kind of loan to pay off personal debts, such as credit cards or a tax bill.

Why you might consider a short-term business loan

Anyone who has run a business understands that a cash flow crunch can occur for any number of reasons, no matter the size of the business. Short-term business finance provides a simple solution and fast injection of funds to alleviate a credit squeeze and let you focus on running your business.

Backed by equity in your property, short-term business finance can be used to:

Purchase new stock or equipment
Make wage payments or hire new staff
Offset slow-paying customers
Pay outstanding tax bills
Fulfil a new contract
Smooth out time lags between invoice payments
Start a business
Invest in an established business or buy an existing business

You can also use a short-term business loan to take advantage of a new business or investment opportunity that needs immediate action and funding.

Where you can obtain a short-term loan in Australia

The good news is there are many short-term loan providers in Australia, available from a range of lender types. Here’s a snapshot of the main institutions that provide short-term finance:

Banks: Traditional lenders are renowned for offering low-interest rates with strict lending criteria. A bank loan typically suits people with high credit scores (i.e. a good credit history based on paying off debt on time, demonstrated savings, not defaulting on a mortgage payment, and so forth). Banks often have lengthy application and approval processes – which is not ideal if you need funds quickly.
Private lenders: As the name suggests, a private lender is an independent financier backed by institutions and investors. As such, private lenders tend to be more flexible in their approach and product offering, and are attractive for those with lower credit scores seeking a fast application and approval process. Private lenders usually charge higher interest on loans, which are often deemed as riskier.
Non-bank lenders: These are financial institutions that are not banks, credit unions or building societies. Non-bank lenders don’t offer the breadth of products of traditional funding providers, but they are flexible on rates and fees – and therefore often appeal to self-employed borrowers due to less strict lending criteria.
Fintechs: A rapidly growing and dynamic sector within the finance industry in Australia, fintechs use technology to keep costs low (passing that onto borrowers in the form of lower interest rates) and algorithms to better judge risks (ensuring fewer defaults and better deals for approved borrowers).

Key Takeaway

If you are facing a cash flow shortfall in your business or personal life, and you have equity in your property, a short-term loan can be used for up to 36 months for a variety of purposes.