A recent survey revealed three quarters of Australia’s SMEs made a decision to access business finance – whether as a means to invest in their growth, to fund day to day operations, or to refinance or manage existing debt.
In a crowded market, though, choosing the right lender can present a challenge. These 4 things are worth thinking about:
1. Best solution: Widen the search
The right type of business finance has features suited to specific purposes.
Avoid the ‘one-size-fits-all’ approach. Business requirements vary. Some might need secured business loans for large investments; others want something more flexible. Perhaps the answer is a ‘line of credit’ product for at-need availability, or specific solutions like equipment or vehicle finance.
The search for the right solution shouldn’t be limited.
Banks are not the only options. Many businesses choose non-bank lenders, and benefit from advantages such as flexible arrangements, prompt, efficient customer service and advice, and more personalised financial products. They see added value in lenders who get to know clients and their business needs – present and future.
In fact, almost half of SMEs rate the existing relationship they have with their lenders as more important than the cost of the loan.
2. Rates: Dig a little deeper
The interest rate might be top of the agenda, but it doesn’t tell the whole story. Obviously it’s smart to find a competitive rate but there are other questions to ask:
- What are the implications of taking a fixed or variable rate?
- What impact will establishment or exit fees, early payment penalties, and any other ongoing fees and charges have on the total cost of the loan?
3. Transparency: There shouldn’t be any surprises
Businesses should research lenders, as they would any other provider. Reputable lenders are committed to transparency, and forthcoming about:
- Total costs, fees, charges and penalties
- Product disclosure, terms and repayment schedules
- Credentials and licenses
4. No obstacles: Time is money
Will the business lender who ticks the boxes on all the points above also smooth the track to fast, flexible and fuss-free finance?
Lack of finance, or delayed access to funds, represents lost opportunity.
An often overlooked but real ‘cost’ of external finance is the time spent in securing it. The search alone is time consuming. It pays to investigate the processes potential lenders have in place.
- Is the application process quick and easy?
- How soon after approval will a lender make funds available?
- What is the lender’s availability? How easy is it to make contact and get a response?
Every hour of waiting is a loss of valuable business time, and a hidden cost of a business loan.
As businesses navigate what can be a complex lending landscape, each of these considerations raises additional questions. It isn’t surprising that almost 50% of SMEs need help, and have widened the search for the right answers.
GetCapital is Australia’s leading non-bank SME lender, and knows how important it is that Australian SMEs choose the right product and the right lender to match their business requirements. Talk to one of their dedicated Relationship Managers about a range of innovative finance solutions.