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Can I get finance for my new business?

Thursday, 13 April 2017

Can I get finance for my new business?

We’ve seen it time and time again: clients coming to us with the idea of starting a new business venture, in a slight state of stress because they’ve been turned away by a bank/financial institution after applying for finance to get their business off the ground. Often, their idea has promise, and significant planning has already gone on behind the scenes, yet they are still turned away and left unsure why. It seems that a lot of people go through this kind of experience – herein lies the misconception that start-up funding is an elusive privilege granted only to those who have significant capital behind them already.

Over the coming months we’ll be sharing some stories of clients whose new businesses we’ve helped get off the ground, but in the meantime we’d like to debunk some of the myths and answer a couple of common questions about getting finance for a new business.

Do I need to have a company incorporated with the NZ Companies Office?

No, not right away. If you’re planning on working as a sole trader, for example as a trades person or courier driver, you might not even do this at any point. However if you do plan on setting up a Limited company but you’re only just starting to explore what your options are, and want the peace of mind of having finance pre-approval before you take that step, that’s just fine. It is best to have an idea of what the shareholdings will be though and this is something we would discuss with you. The company can be incorporated when you’re ready to take out the loan.

Do I need to be registered for GST?

In a few cases, no, but generally yes, although like above, not for the purposes of pre-approval – only before finance is drawn down. The amount of revenue a company generates each year determines whether or not they need to be GST registered, but that threshold is quite low. If the business is going to be your only source of personal income, any finance application generally won’t meet the debt-servicing criteria if the business’s revenue is predicted to be less than that GST threshold.

What financial information do I need?

A business which is starting up obviously has no track record (unless you’re buying an existing business) so how will a finance provider assess your new company’s ability to repay? The answer is a “cash flow forecast”, or just “forecast”. You might have already spoken to an accountant and drawn one up with their input, or had them create one for you, but either way it’s important not only for a potential finance provider to assess how you’re going to repay them, but for you to know how much you’re going to have left after all of your business costs to pay yourself! We understand that a lot of people just want to get out there and work, so we can put you in touch with experienced and reliable accountants who can help you prepare this kind of information. It’s not as scary as it sounds and will help you understand what needs to be done to run your new venture profitably. 

What can I finance?

Almost anything – and we don’t know about other brokers, but we like a challenge. Vehicles such as utes and vans might be all you need to get started or you might need a truck, heavy machinery, agricultural machinery, plant/equipment, IT equipment and software, or medical equipment. There’s working capital to consider too – when you first start, how long will it be before you start bringing in revenue? Maybe you need to fit out your premises or pay franchise fees, or buy stock.

Whatever industry you’re in, or looking to get into, it’s always a good idea to discuss your plans with a finance broker who knows not just one way of doing things, but many different ways of doing things, and can openly talk about what the best solution would be for you and your business. Contact our team for a no obligation chat about making finance for your new business easy.