Small business loans made easy

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Contents4 Four reasons why you may need a short-term loan 6 Financing the different stages of business 8 Credit checks and credit scores 10 Online loans 12 Why OnDeck understands small business 14 More ways we can help you succeed

The information provided within this document is of a general nature and is intended to be a guide only, in accordance with MYOB’s Legal Disclaimer. For specific advice regarding your particular circumstances, please consult your tax agent or the Australian Taxation Office as appropriate.

We’ve removed the stress from funding so you can take your business further.

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Australia’s 2 million small businesses are the backbone of the economy. They employ over 7 million people or 70% of the country’s workforce.

When it comes to funding, however, they are not well served. Around 80% of small business owners don’t apply for finance, often because it’s too difficult. This means less growth, fewer jobs and fewer opportunities.*

MYOB has been helping businesses succeed for over 20 years, and we’re here to help you too. That’s why we’ve partnered with OnDeck to help solve the issue.

In this guide, we explore financing various stages of business, credit checks, credit scores and accessing short-term business loans.

We want to ensure you’re armed with the information you need.

We’ve removed the stress from funding so you can take your business further.

The small business finance problem

* Source: Wrigley, S. (2015) SME Business Financing Survey, Gundabluey Research

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1Purchasing inventory at a discount: It’s not uncommon for a small business owner to need quick access to short-term financing to take advantage of a business opportunity. Purchasing specially priced inventory that will turn quickly and provide additional profits can be a good reason to use a short-term business loan.

2Overcoming a seasonal cash flow gap: Many seasonal businesses sometimes require an additional influx of capital to meet expenses, as long as the business maintains sufficient cash flow to comfortably make the periodic payments.

Four reasons why you may need a short-term loan

As a general rule, short-term financing will have a lower total cost, but will likely have a higher periodic payment when compared to a longer-term loan, which could have an impact on your immediate cash flow.

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3 Meeting project start-up costs: Ramping up a new project sometimes requires more capital than what is available from cash flow. A short-term loan could be a good fit for covering expenses that can be recouped in less than 12 months.

4 Emergency repairs: Paying for repairs on equipment that is critical to the operation of your business can be a good reason for a short-term small business loan to help get operations running without a four-year or longer loan obligation.

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Financing the different stages of businessThere are differences in the financing options available to a start-up, a growing business with two or three years under its belt, and an established business that has been around for ten or more years.

Financing start-ups

For many start-ups, looking at alternatives to the traditional small business-lending model makes a lot of sense. There are options available for these businesses, even those with less than perfect credit profiles.

Some of the more popular and successful options for start-up financing include:

Friends and Family: Borrowing from friends and family might not be the first place business owners look, but it’s one of the places they find the most success.

In fact, it outpaces crowdfunding, grants, trade credit, business credit cards, bank loans, online business loans, factoring, merchant cash advance, and equity financing for all but the largest and more established small businesses.

Crowdfunding: The practice of raising monetary contributions from a large number of people, which is becoming a popular way for early-stage companies to access capital.

Non-Profit Micro-Lenders: Non-profit micro-lenders focus on small businesses that can leverage a relatively small loan amount into a big impact within their businesses. These micro-loans often include very favourable loan terms with very low or even no interest.

Traditional Finance Lenders such as the banks & credit unions: Not all start-ups will be eligible for funding from such institutions, particularly without collateral.

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Young businesses with at least a year in business

Although a traditional lender like a bank or credit union typically wants to see a few more years in business, online lenders will work with a younger business that has 12 months under its belt, provided it has strong business performance.

Online lenders typically look for strong cash flow and annual revenues of at least $100,000. Cash flow is just one is just one of many measures used to evaluate the business health, not just personal credit and assets.

Well-established businesses

Businesses that have been around for many years and have a well-established credit profile have the most options. Traditional lenders like the local bank can be a good source of capital. However don’t dismiss online business loans or others described above. Many online lenders offer loans designed to meet both longer-term and shorter-term capital needs. And

the speed with which online lenders

operate is an obvious advantage to

any business.

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Credit checks and credit scores

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A ‘Hard’ credit inquiry

Typically, in Australia, a hard credit inquiry is associated with an application for credit. For example, if you apply for a credit card, a car loan, or a home mortgage and the lender checks your credit to make a lending decision, it’s considered a hard pull and can impcat your credit score for every hard inquiry.

A good personal and business credit score can make a difference with some lenders when you apply for a small business loan. And while building a good personal credit score requires you to apply for and use credit, the associated credit check that follows every credit application can actually hurt your score.

Knowing how credit inquiries impact your credit score can help you make decisions about where, and when, to apply for a loan. It’s appropriate to ask your lender what type of credit inquiry they’ll be making to evaluate your credit.

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Online loans Here are a few reasons small business owners should consider alternative sources of finance:

+ Many traditional lenders are still reluctant to offer financing to small businesses. Some will require a form of security which may include equity in a home or other property.

+ Online lenders have a more streamlined application and approval process - funding can be granted in as little as one business day.

+ Borrowers who might not qualify at the bank are able to get financing online.

When looking for an online business loan, it’s important to ask four questions

What is my loan purpose? This will not only help you determine whether or not the cost of the loan and the loan term make sense, it will point you in the direction of the lenders who are best able to help you meet your needs.

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How much money do I really need? The loan amount you will need will also help you determine where to look. For example, many banks would prefer to lend to a

business requiring $500,000 not $50,000.

What’s more, if you know exactly what you need, it tells any potential lender that you’re taking a thoughtful approach to borrowing to meet a specific need, rather than looking for a blank cheque.

What does my credit profile look like? Because different lenders have different credit criteria they use to evaluate a potential borrower, understanding the strength of your business and personal credit profiles will help you avoid wasting time investigating lenders where you likely won’t qualify—and will help you determine where your profile is weak so you can make improvements.

Do I have the information I need to apply? Traditional lenders will sometimes require a different set of information when you apply than an online lender. Before you apply, make sure you have the right documents and information at your fingertips.

While it’s not necessary that a business owner become a financing expert, the new landscape does require that business owners do their homework to understand their particular business needs.

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Why OnDeck understands small business

We’ve delivered $4 billion in loansSupported 45,000 businesses Created 74,000 jobs

OnDeck’s rapid growth in the United States over the past 8 years and more recently in Australia, addresses the need for stress-free funding to support small businesses in realising their potential.

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About OnDeck OnDeck is a leading small business

lender dedicated to changing the way

small business owners’ access capital.

OnDeck Australia is backed by On Deck

Capital, Inc., founded in 2007 and a

publicly traded company on the New

York Stock Exchange, and is partnering

with MYOB, the accounting software

provider trusted by more than 1.2

million businesses.

While many lenders base decisions

solely on personal credit scores and

collateral, OnDeck focuses on additional

data such as cash flow when analysing

your business. This means OnDeck can

approve many businesses that may have

trouble getting finance elsewhere.

Personal credit score and assets are not

the only criteria to judge a business. The

OnDeck Score™ can measure the health

of a business better than traditional

methods, using business performance,

cash flow and hundreds of different

data points.

The loan application process is

straightforward with funding in as fast as

1 business day for approved applicants.

OnDeck works with businesses in over

700 industries ranging from doctors and

restaurants to repair shops and retailers.

Businesses that have been open at least

1 year and have at least $100,000 in

annual revenue are eligible to apply for

an OnDeck loan.

The end result means business owners

can spend less time searching for finance

and more time growing their business.

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The application process is easy as 1-2-3

1 ApplyThe unique scoring system means

applications are fast, convenient

and efficient. Simple 10-minute

application process.

2 ApproveLoans granted are dependent on the

health of your business and can range

from $10,000 - $150,000.

3 FundBusiness owners are granted

with the funds in as fast as one

business day.

Apply now >

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ASME152968-0316

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