leveraging off a business

I am going into business at the end of the year with 2 x 3 year contracts operating under my company.

turnover will be about a million and the return about 8-12%.

tangible assets about 50k per contract but not much else. These are management contracts

I will be a director/employee of the company.

I am trying to understand how I can obtain finance for more contracts or startups as we have a good niche. Do I need more assets? or more turnover? profit will always be 8-12% or higher

 

What are the funds to be used for? Working capital, purchasing goodwill/business from others?

Generally business lenders will want security, either resi or commercial. In some cases some lenders are moving towards cash flow lends with minimal security other than deposits for partial costs, however these are for long history businesses with strong cash flow.

 

ANZ is the leader by far in this space.

Are you looking to finance equipment for the business or are you purchasing another business or are you looking for a business overdraft/revolving line of credit?

Startups are extremely hard to finance as there is no history to demonstrate cashflow hence its a very hard application to get across the line. We would need to see what contracts you have in place, the history of the sponsors, demonstrate a good asset and liability position, etc.

Purchasing an established business is much easier (still not a walk in the park) to finance as credit can see the history of that business via the tax returns.

Financing equipment is much the same - its very hard to finance equipment for a start up.

At a minimum you will need to prepare the following:

1. Resume of the sponsors/directors
2. Cashflow forecast prepared by your Accountant
3. Business Plan (including a SWOT analysis)
4. Previous Financials of the business (assuming you are purchasing an established business)

 

ANZ certainly have the appetite for it - but their turnarounds are shocking.

STG is moving a lot more into the cash flow lend space to try counter ANZ, so it's positive to see more competitive in the product space.

If equipment finance, i'd be avoiding the majors if the business doesn't have a history or the equipment is aged (purchasing equipment which isn't new) and focus on niche lenders, there are still competitive offerings for businesses with 1 day old ABN's.