The small business funding challenge

Ready yourself

Small businesses find it seriously hard to gain funding, according to Cara Waters’ article in the Sydney Morning Herald. Cara highlights many of the issues Influx Funding  addresses by helping small business navigate a cluttered and confusing market when sourcing business finance.

Sure, self-funding a lean start-up from savings is great but many us understand the advantages of using finance to accelerate business development. Our experience tells us that the top challenges facing small business seeking finance are finding a reputable lender, gaining attention, and sourcing finance quickly at a competitive interest rate.

The changing landscape 

Work is changing with people choosing to create profitable side businesses to exercise skills without the high corporate overheads whilst others commit full-time to their venture knowing that a single focus leads to better outcomes. Technology helps too, with small business adopting new technology to create slick customer engagement models to win more customers.

Big banks have always struggled with small business. It’s the ingrained conservatism and reluctance to genuinely support small business which causes upset and so much negative press. This frustration puts them at a disadvantage to other financiers who will give small business a fair go.

The challenge

The big banks have made an artform of creating minimum credit hurdles that only well-established businesses can possibly hope to clear. They apply unrealistic filters when assessing the directors’ background, turnover, profitability, and time-in-business. There are many stories of small business operators being turned away simply because they are not profitable enough…for the bank.

Small businesses are desperately under-serviced with many operators forced to fall back on credit cards, family and friends. It’s clearly not good enough, and we expect the royal commission into banking to shine a light on the issues. Banks may get up to speed and adapt their credit models to meet the changing business landscape, we just don’t think they’ll move quickly enough and are certainly not ready right now.

The solution

Alternative finance describes a group of small and nimble banks, financial technology firms and private financiers who have stepped up to fill the void and support small business. The lending market has expanded rapidly in the last few years as banks tighten up on small business; pushed by regulators to slow credit growth and by shareholders to serve more profitable segments.

We have seen this first-hand through our active monitoring of the market. We have taken the time to meet the lenders and fully understand their customer service models. We deal with lenders who align with our values of integrity, independence, transparency and value for money meaning you’re dealing with the right kind of people from the outset. Some of our lenders are household names but others, whilst lesser known, are rising stars offering fantastic financial access, flexibility and service.

How much time do you have?

Gaining finance today can mean wading through the material of dozens of lenders. Each one claims to be the most competitive, quickest, and easiest, but they can’t all be like this and most people simply don’t have time to consider all the options. You’ve got a business to manage and you need to engage a lender who asks the right questions and obtains the information they need to provide funding.

Time is money and engaging a bunch of lenders only burdens you with administration when you really need to focus on your own customers. Gaining funding quickly allows you to resolve short-term issues and launch new initiatives into your business, so it’s critical that your time is well-spent.

How to enhance your capacity

Reviewing your finance arrangements every six months helps ensure a good fit with your current and future requirements.  This is good business practice and gives you the pulse of a changing finance market. We often hear stories of businesses improving their loan facilities as they go with the Water’s article highlighting how a small business can quickly become very large as they gain traction in the market.

Use the Influx Funding product selector to test the market and confirm that you’ve got the best lender for your needs. When possible, improve your arrangements in one of the following ways;

1. Reduce funding costs – Lenders understand that your business risk reduces as your business becomes more established, diversified, and efficient. Demonstrating this encourages the lender to price your business loans more competitively, and if they don’t, then you should test the market and change lender.

2. Demand service – Where there is a lender process which affects the efficient running of your business, seek to minimise or eliminate the issue. Do you need more information or analytics, a dedicated point-of-contact, or better after-hours support? Just asking for better service can keep the lender on their toes and give you the full benefit of their capability.

3. Increase loan limits – Lenders will provide more funding where existing loans have been well managed over time. Pro-actively asking for and gaining a higher loan limit simply arms you with the flexibility to implement new initiatives without delay.

How can you win?

Resolving the small business funding challenge remains a critical issue for small business operators. Complexity and confusion continues to grow as the finance market fragments and diversifies even further. Influx funding cuts through the clutter and connects you with the best lender to support your funding requirement.

If you need funding, hit “Get Started” for a no obligation loan recommendation or contact us by phone, chat, or email for assistance.

 

References:
1. Cara Waters, 1/12/2017, Sydney Morning Herald, “CBA wouldn’t give Victoria Kluth a $500 credit card, now Araza is a $30 million business”.