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Tips for setting up a new business and getting finance

Starting up a new business? Require financing?

Read this first!

Every passing day, Australians are becoming less certain about their future. The writing is on the wall for all to see – the days of lifetime employment are now over.

As employers implement intelligent AI processes, economists fear millions of Australians could be left behind. This threat isn’t just limited to blue-collar professions – this time, professionals of all stripes are at risk. Even those in “recession-proof” careers could soon have the rug pulled out from underneath them.

Some have chosen to respond by taking their future into their own hands. By starting a business, they can set their own schedule, take on like-minded clients, and earn what they’re TRULY worth.

However, know that entrepreneurship is a tough racket. Our nation is among the most challenging places in the developed world to found a startup. Don’t jump in head first – having a plan in place beforehand is crucial.

We’ll light the way for you in this comprehensive business survival guide. From business plans to financing for small businesses, we’ll put you on the best possible footing to not just survive but THRIVE.

The many challenges of running a business in Australia

We all want to be captains of our fate. However, this task is next-to-impossible so long as you work a day job. Your boss dictates when you work, for how long, and how much you get paid. Worst of all, your boss can turn off all your income with 2 1/2 words: You’re fired!

Given recent changes in the economy, it’s no wonder more people are exploring entrepreneurship. However, know that entrepreneurship is no pleasure cruise. It takes dedication, hard work, and patience to clear hurdles that most can’t be bothered to jump.

So, what obstacles do aspiring business owners face? In this section, we’ll address several areas that can trip up even experienced business people in Australia.

1. Getting your company off the ground

By far, getting started is the toughest mental block for the first-time business owner. Identifying your product/service, naming your company, setting up your website – it’s all so incredibly overwhelming.

In their head, the beginner entrepreneur feels like they have to take a moon leap. In reality, all they have to do is take the first step. One task begets another, which begets the next, and so forth.

Of course, you shouldn’t leap in blind – it helps to have a business plan in place. This step is often avoided, as most dread creating a document drier than the Nullarbor Plain. However, by utilising government resources, networking with industry peers, or by hiring help, this step needn’t be so tedious.

Next, you’ll need to tell the world you exist. In past decades, this meant advertising in the paper, on the radio, or via a television commercial. Some of these mediums may still be important, but in 2019, you need to have a strong web presence.

Everyone who needs a product/service these days STARTS by searching for it on their phone. Not only do you need an SEO strategy that targets relevant key phrases, but your site must also be mobile-friendly.

Don’t have a clue about how to achieve either? Scour your LinkedIn contacts and attend local networking gatherings. By doing both, you’re bound to run into SEO agency owners, writers, or web designers.

2. Managing human resources

In the beginning, you’ll wear every hat in your business. From marketing to sales, accounts receivable to the executive branch, you’ll do it all.

Eventually, though, you’ll run out of hours in a day. When this happens, you’ll have to bring your first employee or contractor on-board. This milestone is a terrifying one – not only will you have to pay people, but you’ll have to manage them as well.

Don’t have the cash to pay the prevailing rate in Australia? Hire talent from a lower-cost country like India or The Philippines. These two nations have plenty of congenial, skilled people willing to work for far less than the average Australian. Customer service, SEO writing, graphic design – they can fulfil these roles and many more.

Of course, you’ll still have to deal with human beings. Quality of work can vary from one employee to the next, which means you’ll have to evaluate their work. But, overall, this problem is a good one to have – it marks the moment you truly become an entrepreneur.

3. Paying taxes

Entrepreneurs have a fundamentally different relationship with taxes than employees do – that’s just a fact. When you work a day job, your employer automatically deducts income taxes from your paycheque. Unless you bust into a new bracket, you’ll get a refund at tax time.

Contrast that to the experience of the entrepreneur. They have to document EVERY dollar they take in, as well as their losses. If they don’t have savings set aside to pay their tax bill, the government can apply penalties and even SEIZE assets.

It is absolutely critical to be on top of your tax situation from day one. If keeping track of revenues and tax-deductible expenses is too overwhelming for you, hire an accountant. This investment will more than pay itself back in saved time, money, and sanity.

4. Trading internationally

Ask any experienced owner what gives them the most headaches. Of those who do business internationally, many will cite the red tape they have to deal with every day.

Exporting and importing goods out of Australia is not for the faint of heart. To send products abroad, you’ll need to submit six documents to government officials. To bring them in from overseas, you’ll need to file seven forms.

You’ll have to file these detailed applications every single time you import or export products. To cope, you’ll likely need to hire someone whose job description includes this tedious yet necessary task. If you aren’t at that stage yet, connect with colleagues who already trade abroad – they’ll show you the ropes.

The Royal Commission has made a bad situation much worse

As we already know, getting a secured loan isn’t an easy task. To get one, you need collateral worth as much as the loan you seek. Up until last year, though, aspiring entrepreneurs in Australia weren’t that concerned about collateral. They had plenty of it stored in their homes. For generations, Australians have counted on their wood-framed piggy banks. Except for brief corrections during global downturns, housing prices have never collapsed in the modern era.

Then the Royal Commission happened. Before its findings, the economy had already stalled, thanks to the slowdown in China. Once testimony revealed the banks had been giving out home loans like candy, lending restrictions suddenly tightened. A lot.

All of a sudden, borrowers needed to prove they could make mortgage payments at 7% interest rates. This act dried up the pool of buyers, causing home values to plunge. From peak-to-trough, Sydney house prices have tanked 14%. Nationwide, it’s become the fourth deepest housing downturn ever – and the worst in modern history.

Against this backdrop, bankers have stopped accepting home equity as collateral. Many who bought into the market in the past few years are already underwater. Even for those who aren’t, financial institutions are in no mood to gamble, given the current state of the market.

Unsecured loans from Australian online lenders your best bet for financing

Now what?

That’s the question millions of small business owners have asked themselves over the past year. Every day, entrepreneurs need capital not just to expand, but to cover shortfalls in revenue. The freeze in secured credit has been the cause of many sleepless nights lately.

Fortunately, Australian online lenders have stepped in to fill the yawning void left behind by the banks. Over the past few years, growth in this niche has exploded – take Liberty Financial, for example. In 2018, they saw their net profits surge 10% YoY. Prospa reported that loan originations spiked 36.6% from the previous year. Not so coincidentally, 2018 was also the year that saw the implementation of the interest rate stress test.

The exponential growth we’ve seen from this industry has sparked fears of a bubble. However, none of us should be surprised by this. Options for bad credit business are limited, so where else are they going to turn? Given a choice between not paying their employees or taking a private loan, virtually all owners will take the latter.

Could this end badly? Sure, it could – but given the economic track record of Australia during global downturns, a cataclysmic collapse appears unlikely. During the Global Financial Crisis of 2008, Australia was one of the very few developed nations to avoid slipping into recession.

We stayed afloat on the strength of our resources. After the markets collapsed, China rolled out a massive stimulus spending package. This decision gave a shot in the arm to iron ore prices – one of our biggest exports.

Additionally, our government finances were in cracking shape in 2008. We had one of the lowest debt-to-GDP ratios in the world. We also could lower interest rates at will. Through the use of these financial tools and great economic fundamentals, we weathered the storm.

Fast forward to 2019. While China’s annual rate of growth has slowed somewhat, it still checks in at around 7%. On top of that, our debt-to-GDP ratio stands at 41%. That’s higher than in 2008, but still among the best in the developed world.

Should things go sideways, globally or locally, our government possesses the ability to right the ship.

Who are the most trustworthy Australian online lenders?

Has one bank loan officer after another has slammed the door in your face? Forget about them – you’ll find plenty of Australian online lenders willing to hear you out.

However, it can be hard to know who you can trust. Say the term “private lender,” and many envision loan sharks, 600% interest, and – if they don’t pay – broken limbs.

Today’s regulated private loan industry is nothing like that. All legitimate firms answer to ASIC – the Australian Securities and Investments Commission. This watchdog sets lender rules (e.g., segregation of funds), and they provide a forum for complaints.

Besides, in the internet age, it’s easy to figure out who’s the real deal, and who are taking consumers for a ride. Review sites like Trustpilot allow prospective customers to identify trustworthy companies through a consistent pattern of good reviews. They also enable them to eliminate shady players through a consistent pattern of bad reviews.

However, entrepreneurs like yourself are much too busy to spend all day combing review sites. So, many look to experts for recommendations. It is our mission to help you save and make the most amount of money possible.

Having said that, here are several Australian online lenders that have caught our eye:

1. Capify

With speedy turnaround times, it’s no wonder Capify has become a trusted name when it comes to small business loans in Australia. They are an excellent option for entrepreneurs with less-than-perfect credit, as they don’t require personal financial records.

They are also accessible to all companies, except those seeking new business financing. Capify only requires that you turn over $10,000 per month in revenue. Meet this requirement, and you could qualify for a minimum of $5,000 in funding. If your needs are more substantial, Capify could approve you for a loan as large as $400,000.

2. Prospa

Prospa is even faster than Capify. Thanks to their streamlined application process, they can render a decision in as little as two days. Upon visiting their website, you’ll quickly understand why they have a Trustpilot score of 96%. With clean design and easy-to-understand terms, applying for a loan is quick and easy.

They also accept those with bad credit and approve financing for small businesses up to $100,000. Those who can offer collateral may be eligible for a larger bank loan for SME for up to $250,000. With a 95% customer satisfaction rate and backing from VC firms like Ironbridge, this company is the opposite of a fly-by-night operation.

3. Sail

Have you just begun your small business journey? The first hurdle you face can be the toughest to clear. Magnifying your plight is the fact that almost nobody offering small business loans in Australia – bank or private firm – lends to rookie businesses.

Except for Sail, it appears. Founded in 2016, this young nonbank lender knows what it’s like to be a new operation. As such, they offer new business financing to companies that have only been around for six months.

They also have sympathy for businesses with bad credit. Unlike some firms, they know that a single incident can cause less-than-perfect scores. Finally, they get back to you super-fast. With a goal turnaround time of only 24 hours, you won’t be left waiting for long.

However, their most exceptional feature is their biometric technology. This tech enables Sail to speed through identity checks, which makes their lightning-quick response times possible.

Begin your entrepreneurial journey with a single, brave step

Doing your own thing is sexy. It’s also the single most terrifying thing you’ll ever do. Leaving behind a predictable paycheque and the built-in social life of the office – that’s tough.

However, at no point in history has it ever been so easy to make the jump. The internet offers tutorials, social support, and now, financing for small businesses. So, take that first step. It’ll lead to another, and the next. Then, one day, you’ll have the life you’ve always dreamed of – and you will have manifested it all yourself.

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