The 10-minute sense check for your business loan

We inherently know that ill-fitting shoes can cause issues for growing feet, just as we know that the wrong business loan can cause issues for a small business.

Assessing your business loan is like buying a fresh pair of school shoes for your child at the start of the year. It is a ritual that every family participates.

As parents, we are careful to consider characteristics such as price, comfort, adherence to the school uniform standards, and our child’s expected growth rate.

But sometimes the unexpected happens – our kids grow fast and they no longer fit the shoes that were purpose bought for their needs. They have simply outgrown the perfect function of their shoes and the pain noticeably increases.

We inherently know that ill-fitting shoes can cause massive issues for growing feet, just as we know that the wrong business loan can cause issues for a small business.

Having the wrong loan type causes major issues for businesses. By wrapping up working capital in servicing an inefficient loan, business owners miss out on funding other growth opportunities. This seems crazy as there are so many other options available.

As your business grows and evolves, it is important to find opportunities to align to your capital needs. Savvy business owners recognise this, and look to maximise the efficiency of their business loan.

Mid-term finance is the technical name for when a borrower wishes to refinance an active loan during a loan period – typically anytime from the start of the loan to about six months from its conclusion. Depending on a business owner’s current loan arrangement, a mid-term refinance with a new lender could save thousands of dollars. Business owners are able to sense check their ability to save with a 10-minute process.

Here’s the 10-minute sense check:

Review your current loan

It is important to understand the loan amount, interest rates, balloon payment criteria and if the loan has any early pay out penalties. Working out the entire interest payable via an annual percentage rate (APR) offers you the best position to compare your current one with other loan options.

Sense check your current financial position

By referring to your updated financial statement – understanding your average monthly turnover, and if you have access to any security – that will help you lock in a better rate.

Jump online and compare

There are over 100 registered business loan organisations in Australia. Comparing each one individually will take time and effort. However, there are a range of business loan marketplaces such as Inside Small Business LoanConnect that significantly shortcut the time it takes to compare and apply for loans.

When presented with new loan options, make sure that you review all aspects of the loan arrangement, and seek independent financial advice to make sure that the loan offer is best for your circumstances.

Alex Molloy, CEO, Valiant Finance

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