FAQs Small Business Finance 

Unsecured Business Finance FAQs

What type of loan is right for you?

To manage day to day business expenses such as wages, ordering supplies, rent, utilities and delivery can be a challenge for many small business owners. Accessing the right working capital facility is essential for immediate cash flow and long-term growth;

  • Merchant cash advance is a one-time cash injection repaid over a 3 to 18-month term.
  • Quick access to short-term unsecured finance based on monthly turnover, low docs, high approvals also higher lending costs
    line of credit either secured or unsecured allows you to borrow and repay only the money you need.
  • Unsecured business loans protect your assets while funding business growth. Quick turnaround and easy renewals.  Lending based on the business turnover.
  • Bank term loans the cheapest option if your have equity to offer, requirements are trading three years with solid turnover, full financial with good credit score.
  • Invoice financing turns unpaid invoices into cash where the lender will advance up to 80% of the invoice to relieves the cash burden.
  • Creditor, Debtor and sales invoicing have various terms and charges and can be funded as a disclosed or undisclosed facility. Once approved the facility is available for future use.
How you qualify for short-term loans?

Must have trading history for 6-12 months. Businesses with high merchant retail sales typically under $1,000 per transaction qualify for merchant capital. Other companies are best suited to unsecured business finance that have a spread of customer deposits per month. Suitable for;

  • Restaurant, hotel, club and hospitality
  • Medical, dental and pharmaceutical
  • Retail shops and all fashion stores
  • Manufacturing and Auto industry
  • Hair and Beauty salons
  • Health and fitness clubs
  • Learning and vocation facilities
  • Real Estate and construction
  • Contractors and tradies
  • Professional  services
  • Import and Export
Do I need security?

For unsecured business loans;

  1. No security required and No risk to your assets
  2. Credit assessed on current turnover and future sales
  3. Funding over $70K personal guarantees will be required
  4. Highly preferable that the business is operating from leased or owned premises

Asset lending requires a property, vehicle, plant or machinery to be used as collateral to secured the short-term business loan.

Typical short-term business loan rates
  1. Unsecured lending attracts a higher risk factor as there is no collateral used to recover default loans.
  2. Interest rates charged is dependent on the type of product chosen. Through our lending partners, rates are typically between 1-3% per month. On some global funding products, we can provide 6-10% pa. Dependent on the amount borrowed and term taken.
  3. The interest rate determined by the industry sector, finance term, current sales turnover,  amount of the loan, credit score, etc. Each application assessed on its own merits.
  4. The cost of unsecured small business loans is NOT comparable with bank finance, as the bank will take charge of your assets, thus lowering their risk.
What information is required to apply?
  1. Registered Australian business trading 6 months
  2. Legal trading name for ABN and Veda
  3. Minimum annual turnover of $50,000
  4. Driver Licence ID for all business owners
  5. Business lease and landlord details
  6. Other business borrowings must to be declared
Documents required for approval?
  1. If business in a Trust require copy of Trust Deed
  2. If owned premises require mortgage & rates notice
  3. 6 months recent business bank statements
  4. 12 months statements loans over $75K
  5. 2 years financials loans over $100K
  6. Copy of business premises lease
  7. Copy of overdraft and/or loan agreements
  8. Credit score 500 plus proof of any paid defaults
  9. Last 2 BAS statements
  10. Directors Guarantees
What is the offer?

Your quote or preapproval is based on the information you submitted regarding your business. Our credit team will assess each business on its merits combining bank deposits and YTD profit and loss.

  • Your quote is not an approval for a loan. It’s the first essential step toward getting funded
  • You will need to provide six months business bank statements and other supporting documents for further assessment
  • The minimum credit score is 400 with paid defaults.

 

Can I pay back the loan early?

Yes, we offer flexible funding solutions with the ability to repay the loan early.

  • Different terms will apply to unsecured working capital and short-term secured loans
  • Or renew your term or loan amount as your business situation changes. Conditions apply.
  • If high probability that monies paid back early, best to take shorter term with lower rates

Invoice Finance FAQs

What is invoice financing?

Invoice financing, also known as assets based lending allows the business to access up to 80% of the value of an unpaid or outstanding trade invoice. Typically used by businesses to manage cash flow while they wait for invoices to be paid or receive other sources of revenue. Types of invoice finance;

  • Trade or Credit invoicing
  • Debtor invoicing
  • Sales or Customer invoicing
  • Disclosed or Undisclosed invoicing
  • Discounted invoicing

How does it Work

  • Credit facility is approved then online system is available to access account
  • Business lodges an invoice to pay via online portal
  • Funder confirms details of who to pay via Payment Gateway
  • Payment is made directly to the creditor by the Funder on behalf of the business
  • Business repays the loan in equal monthly instalments via Direct Debit
  • Indicative interest rates 1% to 2% p/m
  • Repayment terms up to 6 months available
  • 12 months trading history
  • Last 2 BAS and 6 months bank statements
  • Directors Guarantees and clean credit file
  • Over $50K require 2 years financials
Types of Invoice Finance Products?

Invoice finance can be used for any purpose, including purchasing new stock, paying suppliers, marketing, renovations or offering your customers a payment plan. Different type of invoice finance such as;

  1. Sales Finance
    • customer installment plan to increase your sales
    • point of sale terms invoice
  2. Working Capital Finance
    • Creditor finance to pay existing supplier invoices
    • Debtor finance to raise funds against existing customers invoices
Features of Debtor finance
  1. Improved cash flow to save time and money.
  2. The most flexible forms of finance available to businesses.
  3. Factors / lenders usually charge a service fee plus interest on funds utilised.
  4. The Factor / Lender can collect debt more effectively than a small business owner.
  5. Better credit management of sales and payments ledger
  6. Credit checks are carried out on business debtors allowing better credit management.
What is professional fee funding?

It is a payment plan designed for professional services such as consultants, solicitors, accountants, recruiters

Cost saving of debtor finance?

Potential cost saving of a debtor finance facility;

  1. no bank overdraft fees
  2. fewer bad debts
  3. lower or no costs for account management, administration & credit control
  4. no need to offer discounts to debtors for early payment
  5. management can spend time and resources on strategic growth plans
  6. get discounts from suppliers for early or prompt payment

 

How to qualify for invoice finance?
  1. Registered Australian business trading 12 months
  2. Clean credit file above 700 score
  3. Minimum monthly turnover of $10,000
  4. Last 2 QTR’s BAS statements
  5. Driver Licence ID for all business owners
  6. 6-12 months business bank statements
  7. Two (2) trade references with contacts
  8. Two (2) years financials over $50K
  9. Accounts receivable for debtor finance
Documents required for approval
  1. If business in a Trust require copy of Trust Deed
  2. If owned premises require mortgage & rates notice
  3. 6 months recent business bank statements
  4. 12 months statements loans over $75K
  5. 2 years financials loans over $100K
  6. Copy of business premises lease
  7. Copy of overdraft and/or loan agreements
  8. Credit score 500 plus proof of any paid defaults
  9. Last 2 BAS statements
  10. Directors Guarantees
What is the rates, fees and terms?
  1. Application fee of $255 on submission
  2. Documentation fee of $220 if approved & offer issued
  3. Funding costs of 2.55% to 4.95% at draw-down and payment of invoices
  4. Sales invoice rate 1% per month
  5. Working capital finance 2% per month.
  6. Terms are 4 to 6 months for B2B invoice facility
  7. Terms are 6 to 10 months for B2C sales invoice facility
  8. Standard bank and credit card charges apply for DDR

 

Merchant Cash Advance FAQs

How does Merchant Advance work?

Repayments are deducted daily or weekly from merchant settlements via a ‘pass through’ account

  • A pass-through account is a separate deposit account where daily electronic sales are directed
  • An agreed withholding percentage is taken daily from the merchant’s electronic sales example 10%, then the balance of the funds 90% credited to the merchant’s business account
  • There is no cost to open the ‘pass through’ account, and the settlement team manages this process for you

 

How to qualify for Merchant Cash?
  1. For Merchants with high credit card and EFTPOS sales typical value under $1,000
  2. Owner of business and trading min of 6 months, provide banking and merchant statements to verify turnover
  3. Minimum business turnover of $10,000 per month with 8 to 10 customer deposits spread
  4. Merchant must show positive bank balance with minimal dishonours, overdrafts OK
  5. Low credit score of 400 plus with paid defaults. Will not accept open bankruptcies, outstanding tax liens, recent foreclosures, collection accounts or open judgments
  6. One year remaining on leased business premises, or confirmation of renewing, no sub-letting. Landlord references are required
  7. If buildings owned need current mortgage statement and rates notice
  8. Merchant cash advances over $75K we require two years signed financials
What is EFTPOS finance?
  1. Electronic Funds Transfer at Point of Sale. EFTPOS simply means cash is not physically exchanged to settle the sale transaction
  2. Rather payment is made electronically directly from customer’s bank account into the merchants  business account
  3. EFTPOS funding is also referred to as Merchant Cash Advance
How much can I borrow?
  • You can access 50% to 80% of your monthly turnover.
  • The final amount offered assessed on your business proven ability to repay the advance or loan
  • Other assessment factors include credit score, term, industry and other current loans.

 

Terms of a Merchant Cash Advance
  1. Merchant cash advances designed for short-term cash flow funding
  2. Business must be operating as a retailer with high merchant transactions
  3. Typically increases are calculated from 50% to 90% of your monthly turnover
  4. The advance term is between 3 to 18 months which based on your daily sales and the negotiated percentage of payback set over that period
  5. Payback adjusts with your revenue, the higher the daily sales, the faster the advance is repaid.
Costs of a Merchant Cash Advance?
  1. As this is not a loan, there is a risk factor rate applied to the merchant cash advance
  2. A payback % is negotiated and deducted daily from the merchants future sales
  3. Maximum take out would not exceed 10% of daily sales.
  4. There are establishment fees and DDR fees dependent on the lender
Am I entering into a loan contract?

No, the merchant cash advance is not a loan as they are 100% connected to your daily future sales

  • Traditional loan repayments are always fixed and not based on your actual sales
  • Fixed term bank loans restrict the business when sales are flat and cash flow is needed to keep the business operating

 

Unsecured Working Capital FAQs

Is there a redraw facility?
  1. Depends on your credit risk at the time of the approval.
  2. Redraw assessed on your payback history and management of the advance or loan
  3. An Invoice finance facility can be used multiple times within the approved limits
  4. Unsecured Line of Credit is an evergreen loan with withdrawals within the agreed limit.
Can I apply with bad credit?
  1. Each application and industry risk assessed on its own merits. A complete evaluation of your business revenue, type of industry, the loan term and amount with credit ratings.
  2. We require your credit score to be above 400, with small paid defaults.
  3. Construction or trade industry must have a credit score of 600 plus.
  4. No bankruptcies, judgments or court liens are accepted. No repeated dishonours.
  5. Merchant cash advance has a high approval rate compared to bank lending.
  6. Discuss your finance scenario with us to find the best solution.
When can I receive funding?

How it Works

  • Provide all required documents are uploaded, including bank statements for a quick assessment.
  • The onus is on you to provide all details in the quickest manner; typically we can fund within 2-5 business days.
Do home businesses qualify?
  1. Yes, we can fund appropriate home businesses that established with solid regular turnover
  2. Unsecured business loans assessed on your monthly sales and the business ability to pay back the loan
  3. The online or home business registered in Australia with ABN and at least one director or owner resides in Australia
  4. Will require 12 months trading history
Do you finance contractors?

Yes under the following qualifying criteria;

  • 2 years in business
  • must have commercial or business premises
  • credit score of 600+ with no dishonours, no unpaid defaults, no judgements
  • Short-term 5-12 months
  • Unsecured options from $10K to $70K
Type of working capital loans?
  1. Unsecured Business Finance is a simple business loan that does not require a credit card and EFTPOS processing. Bank deposits from all methods. Payments made daily or weekly which allows better management of your cash flow
  2.  Merchant cash advance is an advance against your future credit card and EFTPOS sales. Repayment terms are flexible and calculated based on monthly turnover and draw down amount and industry sector
  3. Working Capital using property, vehicles, plant and machinery as collateral. Terms 3 months to 2 years. Bad credit accepted and no financials necessary for asset lending. Must show viable exit strategy to repay the loan.
  4. Alternative Capital through debt and equity finance. Also, refer to our capital raising services
    Invoice Financing allow the business to access up to 80-100% of the value of an outstanding invoice.

Capital Raising FAQs

Why consider raising capital?

For various reasons, many SME’s fails to meet the banks lending requirements where security or full financials are unavailable. Banks also require high credit score as a risk indicator when lending money;

  • Alternative funders will consider business trading for min 6-12 months where banks need three years financials and consistent trading history
  • Alternative lending such as unsecured business finance and merchant cash advances and invoice financing is cash flow funding based on turnover providing a short-term solutions.
  • Entrepreneurs seek private debt or equity from investors by assessing the overall business opportunity and global potential, including proof of concept or an established market needing capital for expansion or acquisition.

 

Which companies can raise capital?
  1. Australian public companies with more than 50 non-employee shareholders can raise funds from the general public.
  2. Australian private companies which is proprietary company with less that 50 non-employee shareholders can raise funds.
Why invest in unlisted bonds?
  • The investor receives a regular income usually above deposit term and cash rates.
  • Corporate or SME bonds are less risky than shares in a company, which ranks lower than equity shareholders.

 

Can you fund raise without a disclosure document?

To summarize a disclosure document is not required when;

  1. An offer is personal one under Section 708/ made to fewer that 20 persons in a 12 months period
  2. The offer will not result in more that $2 million being raised in a 12 month period (exclusions apply)
  3. The offers are made to sophisticated or professions and institutional investors due to their financial status, experience and wholesale status
  4. Offers are made to current holders of the security
  5. Other disclosure regimes under the Corporations Act such as takeovers, schemes or arrangement
Difference between unsecured debt and equity
  1. All businesses are usually funded through debt or equity, with various instruments available between short-term, medium and long-term options.
  2. Debt is an obligation from one party to make payments to another party, and there is always a cost to borrowing the money. There are two types of debt funding secured and unsecured.
  3. Equity relates to ownership. The equity in a company sold via shares in return for investment capital.  This money is often known as ‘risk capital’ as there is no guarantee of return and no contractual liability to the existing business.
  4. Equity capital used for establishing a startup business, expansion strategy or business development requirements. More information on our Capital Raising program for equity funding.
What is a small-scale offer?

Offers that do not need disclosure. Section 708 of the Corporations Act describes a Small-scale offers with 20 investors in 12 months to a limit of $2 million

Information to provide to investors?

Potential investors are presented with hundred of opportunities each year. To ensure your business get a fare review and invited to present your offer, you need to investor ready before you commence on your capital raising journey. Seeking debt or equity investment is one of the hardest jobs of an entrepreneur. Some tips for a successful presentation and investment;

  1. Investors are looking for a solid business, not an idea. You need have proof of concept, prototypes or foundation customers that proves the business model, if you have not already commenced trading and established your market share.
  2. It is important that your management team has a proven track record or experience in the industry sector. If not, accumulate an advisory board with experience. Investors invest in people first and the business second.
  3. Address the problem you are trying to solve. You may be disrupting a particular market or have discovered a new service or product that consumers need.
  4. Know your target market. Customer segmentation with key marketing metrics will demonstrate you have thoroughly researched your potential market.
  5.  Clearly define your implementation strategy and exactly ‘how’ you are going to make money.
  6. Know your competitive landscape. Every product or service has competitors and being the first to market has benefits.
  7. List your barriers to entry such as proprietary technology, intellectual property patented designs. If your onto the next big think, you will soon discover copy cats or your products or service in some form.
  8. Have a clear and believable grasp on the financials both actual and projections forecasts. Touting a high valuation based on your prediction of a billion dollar company in the next few years will not get you any investment.
  9.  Show you believe in your opportunity through financial commitment and your have ‘skin in the game’. Investors will back you if you back yourself.
What is the typical cost of raising capital?

Dependent on the size of the firm and level of experience of the corporate advisory firm you will engage. Legal firms, accountant and business introduction intermediaries offer different levels of capital raising services.

Typically upfront fees are paid at engagement and a commission fee is paid on success ranging from 2% to 10%.

 

Unlisted Bonds FAQs

What is an unlisted Bond?

Unlisted Bonds are similar to corporate bonds issued through private companies and not traded on a national stock exchange.

  • Established companies will issue bonds to raise money from private investors to fund business activities.
  • The investor is lending the company money and in return is paid interest over an agreed  period of time.
  • While the principal is guaranteed, there are risks of not getting your money back, if the company goes out of business.

 

How are unlisted bonds differents?
  1. A corporate bond or unlisted SME bond is not the same as a government bond, which is a low-risk investment.
  2. A corporate bond is not the same as a term deposit, which is currently backed by the Australian government for balances up to $1 million.
  3. A corporate or unlisted SME bond is not the same as an equity share, where you have ownership percentage share in the company. As a bond holder you are considered a ‘creditor.
What are the investment risk?

Unlisted or SME bonds are more risky that government bonds, and each investor should thoroughly investigate if this investment strategy is suitable for their particular financial circumstances. Type of risk to consider;

  1. Credit risk
  2. Interest rate risk
  3. Liquidity risk
  4. Prepayment (or early redemption) risk

 

What are the basics of an unlisted bond?

To understand how to assess if investing in corporate or unlisted bonds is right for you, read the Offer document or Prospectus regarding the company’s offer. The bond offer will mostly include the following;

  1. Maturity Date and term
  2. The interest rate offered
  3. Frequency of interest payments
  4. Company’s financial capacity
  5. company market value
  6. Security and ranking (if applicable)
  7. Early redemption, if the bonds can be bought back early