Are you starting a new business? Well, I’m an accountant. My first question is, how are you going to finance that? Now there’s very different ways of financing businesses, I’m just going to run through a couple of the main ones. Now I’m talking, starting a business from scratch, I’ll talk the end about if you’re actually buying a business, which is slightly different. But if you start a business from scratch, how are you going to finance it?
- One, you can put your own money in.
- Two, you can hit up mum and dad and see if they’ve got some cash, they want to put in.
- Three, you can hit up friends and family.
I’m going to say if you go with options two and three, make sure you document it and you’ve got really good loan agreements in case stuff goes pear shaped, because friends, family, are not friends and family if you don’t pay them back, just a helpful hint.
Other ways that you can finance a business could be you could get a bank loan, if you’ve got property that has equity in it, you can get a bank loan or a credit card to be able to allow you to run the business. The other thing is thinking about what you’ve got equipment that you buy, and there can be equipment finance for purchases, and machinery or vehicles or tools.
There are also credit accounts with suppliers. If you’re going to go and buy tools, then you can get a Bunnings account I think it’s called One Pass. All kinds of suppliers will give you credit terms but sometimes they want you to pay cash for the first few invoices until you prove your are “good for it”.
Being able to purchase goods on credit gives you a bit of leeway to be able to produce your goods and service and get paid. But whatever you do, make sure you have it documented. Make sure you read the terms and conditions of what’s payable and when it’s payable.
If you’re buying a business, similar yet slightly different, you can still put money in, you can still hit up family and friends. But if you’ve got a business that you’re buying that’s got income that’s already and tit’s going to continue, then there is often an opportunity for the bank to finance that either through a direct business loan or maybe a withdrawal on your loan.
We work with some of the best business brokers, the best mortgage brokers in the country. We can have a chat to them work out what’s going to be right for you. We can sit with you and work out what’s the best strategy. running businesses and helping people run businesses is what we love doing. Have a chat to us before you move forward.