Understanding How Debt Impacts Your Business

Small Biz Matters – a half hour program each week where you can work ON your business rather than IN it.
with Alexi Boyd from Boyd Office Management Services
Date: 8 May 2018

Debt financing is an important aspect to managing and understanding your finances as a small business. Quite often small businesses will have long standing loans for which they’re not getting the best rate or they set up their finances in a hurry and haven’t looked at the bigger picture. We’ve been talking a lot in the past few weeks on Small Biz about running a business with the end in mind and what better way to end this series with an expert who can assist us as a Debt Advisor?

Welcome to the show John.

Topics we’ll be covering:

Why is it so important to approach an independent broker and how can you tell if someone is or is not?

• Ask to see their credentials – Are they an authorised credit representative
• What’s their experience and background; do they understand the needs of small businesses?
• Ask about their ownership structure
  • Financial planners?
  • Accounting firms ownership?
• Ask your colleagues in the small business world
• Background of the person you are dealing with is important too. - Ask!
• Lure of one stop shop is very appealing to small businesses who are so time poor.

Debt advisory is one of your specialisms – what does that mean?

• Cashflow for debt management – do you need a number of different loans or should you restructure.
• Big questions to ask
  • What is your debt?
  • What is it for?
  • Is it for the right purpose?
• Classic example is those who use the equity in their home but you should review this. After all, it is a long term loan rather than a higher interest rate over a shorter term.

Preparing yourself for loan application as a small business

Be open and honest. Half way through the application if there is information which is incomplete or missing that can really change the loan prospects. In particular around tax debts. As of 1Jul17 the ATO can now, for any unpaid debt over $10k, they can list that as a default on your credit file ! But don’t panic there are options for dealing with the debt    

Brainstorm where all of your debt is

Top tips on preparing for the application process

• Keep your books up to date – always lodge with the ATO ontime especially for BAS
• Be prepared to be open and that will make you well prepared for the application process
• Know how to structure yourself and your businesses in the family but with VIEW to how you’re going to access funds / lending. Let your accountant know what your plans are and think ahead.
• Low income = reduce tax OR high income = increased lending capacity
• Think in ten years time – where do you see your own personal funds NOT just where your business will be in ten years time

To find out more go to their website: www.commandhomeloans.com.au