Navigating Finance and Loan Amid Inflation In Australia

Navigating Business Finance and Loans Amid Inflation in Australia

Inflation is a significant issue for Australian business owners, particularly for small to medium-sized enterprises (SMEs). The rising costs of goods and services can strain cash flow, making it challenging to meet business expenses. This article aims to demystify business finance and loans in the Australian market, focusing on how they can help businesses manage inflation and maintain healthy business cash flow.

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Understanding Inflation and Business Cash Flow

Inflation refers to the general increase in prices over time, which can erode purchasing power. For businesses, this means higher costs for labour, supplies, equipment, rent, utilities, and taxes, among other things. When these costs rise faster than revenue, it can lead to business cash flow problems. Cash flow, the money moving in and out of your business, is crucial for survival. Cash flow pays for daily operations, supports growth initiatives, and ensures you can meet financial obligations.

The Impact of Inflation on Australian SMEs

Inflation can significantly impact Australian SMEs, making it difficult to meet various business expenses. A recent survey revealed that 54% of Australian SMEs would consider taking out a loan to counter inflation costs. The most impacted areas include labour, supplier costs, petrol, equipment purchases, rent, insurance, office and staff amenities, utilities, business consultants, and taxes.

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The Role of Business Loans

Business loans can provide a lifeline for SMEs grappling with inflation. They can inject much-needed capital into the business, helping to cover operational costs and maintain business cash flow. There are several types of the best business loans in Australia available, each with its own features and benefits.

Unsecured Loans: These loans do not require property security, making them a flexible option for businesses that may not have significant assets. They can be used for a variety of purposes, including managing cash flow and bridging finance until major bank facilities are ready to settle.  

Loans range in size from $20,000 to greater than $2M.  The application process for unsecured loans can be done in minutes with approvals and funding possible the same day.  There are even unsecured loan options for those with bad credit.

Short-Term Property Loans: These are loans secured against property, typically for a short period. Short Term Property loans can provide quick access to funds for businesses in need.

Invoice Finance: also known as debtor finance and factoring, invoice financing is a business line of credit secured by your accounts receivable.  This cash flow solution allows for up to 95% of your invoice value to be available in credit to you the day you write your invoice.  This business line of credit is particularly useful to businesses that are struggling with seasonal business cash flow conditions, need to cash flow future work or those supporting a growth expansion to their business.

The application process for Invoice Finance is a full doc application process which means lenders will review your profit and loss statement, balance sheet, aged payables and aged receivables along with your ATO portal printouts. Approvals subject to due diligence can be achieved within 24 hours and often bridging finance can be set up until the business line of credit is settled.

Private Loans: These are loans provided by private lenders, often used by businesses that may not qualify for traditional bank loans because of bad credit or other circumstances. Private loans are secured by either a first or second mortgage.

Because the application process is focused on understanding the value of equity available for security and your exit strategy, lenders do not assess financial reports. This means a private loan application is much faster than a traditional bank loan with approvals (subject to valuation) often achieved within hours.

Overdrafts: A business overdraft is a revolving line of credit with a pre-approved limit.  As you make repayments and lower the balance, your available credit is your limit minus any outstanding balance.

This is a fast and easy cash flow solution for businesses of all sizes and is a loan solution offered by banks and unsecured lenders.

Choosing the Right Loan For Your Business

Inflation and cash flow are critical issues for Australian business owners. However, with a clear understanding of business finance and loans, it’s possible to navigate these challenges effectively. Whether it’s an unsecured loan, short-term property loan, invoice financing, private loan, or unsecured overdraft, there are options available to support your business finance. By making informed decisions, you can ensure your business remains resilient and ready to seize new opportunities, even in the face of inflation.

Choosing the right loan depends on your business’s specific needs and circumstances. Factors to consider include the amount needed, the purpose of the loan, the repayment terms, and the cost of the loan. It’s crucial to understand the terms and conditions of any loan before committing.

Contact us here to discuss which credit option is right for your business.