It’s hard to find a small business owner that enjoys crawling cap in hand to the bank in the early days of their business. With little to show in terms of sales or profits, bargaining power on interest rates is close to non-existent. All too often SME’s find themselves at the mercy of bank managers and inflexible off-the-shelf finance products, locked into 24 month contracts and stuck servicing debt they don’t need.
Yet while SME’s on their own might be weak, you may be surprised to hear that there are around 2 million of them in Australia, responsible for 68 percent of all industry employment and 56 percent of industry gross value added. These are staggering numbers, and they haven’t gone unnoticed by some up and coming fintech (financial technology) entrants looking to take advantage of long standing bank apathy toward the SME sector.
So if you are starting a business this year, while it may not be possible (yet) to avoid the bank altogether, it is feasible to limit your exposure, especially when it comes to financing. Below we list some of the non-bank, alternative providers you should be talking to now if you plan on setting up shop in 2015.
Need some capital to get started? Then it might pay, quite literally, to talk to the team at Moula. For those of you tired of re-hashing your business model to yet another glassy eyed bank employee then the best part is, you probably won’t even need to talk to Moula at all. Their slick loan application process is conducted entirely online. Borrow up to $100,000 and benefit from a speedy and transparent application process, with no penalties down the track if you decide to repay the loan early. Best of all, providing your loan application is successful, you won’t need to secure it against the house.
Business transaction accounts
Provided you get the loan, you’ll now need somewhere to deposit it. Never fear, there are some non-bank alternatives in the shape of credit unions that could be worth checking out. Jump onto a comparison site like Mozo or Canstar and you’ll notice that many credit unions are offering great deals, like the Business Cash Hub account from First Option credit union, with a 2.00% interest rate on deposits over $5000. And while you might be able to rate match that at a major bank, it’s unlikely you’ll benefit from as personalised service as you would with a credit union. Time is money after all, so the less time you need to spend on the phone to an overseas call centre dealing with account issues, the more money back into your pocket.
In store payments
Now you’ve got some capital to buy some stock and you’re ready to open shop, for those of you who are not operating entirely online, you’ll probably need an eftpos terminal. Once the sole domain of the banks, small businesses can now choose from a range of competitive non-bank payment providers, such as PayPal Here and Tyro EFTPOS. If you’re just starting out than PayPal Here’s small card reader might be all you need for the handful of transactions you process daily. For a more robust solution that works in conjunction with your till software then you’re better off checking out what’s on offer from Tyro.
Once you’re in the swing of things, cash flow smoothing is an important consideration, especially when it comes to ensuring you can pay your bills and do your payroll on time. If you’ve been offered a line of credit from your bank with an establishment fee, unfriendly interest rate and lock in term then don’t settle before you’ve explored a few other options. Companies like Timelio are making it easier for small business to turn their invoices into cash sooner rather than later, smoothing the ups and downs and unlocking the capital you need to keep investing in your business. With investors on Timelio’s platform potentially offering better rates, and finance when you need it, not when you don’t, it’s worth investigating as an alternative funding strategy to the banks.
So there you have it. In 2015 it may just be possible to set-up your business entirely bank free. And even if you’ve been trading for some years, there’s no time like the present to wean yourself off unfair banking fees and inflexible bank products designed to make the bank rich instead of you. Get started today and unlock the financial freedom your business needs to accelerate its growth.