Starting up a new small business in Australia is a very challenging venture. In a 2016 Australian census, it was revealed that only 77 percent of small businesses survived their first year. The most common cause of failure for new small businesses is not having enough money during the first twelve months. It is, therefore, important for small business owners to have a lot of cash either from savings or from reputable external sources such as Aquamore finance before starting their businesses.
Small businesses need finance for a lot of reasons. Here are the most common reasons why business owners take out loans for their companies.
To Start the Business. Startup business owners will need funding to get their businesses up and to run. If you are starting your small business, you may have your family and friends involved by borrowing money from them. There are also a lot of options on how to seek external funding. You may apply for a bank loan, get equity investment from business angels, get crowdfunding, or get financial funding from companies like Aquamore finance. The loan that you will get for starting your business may be used to purchase initial stocks, renting an office, hiring staff, and or marketing your products or services.
To Increase Working Capital. You should also have sufficient working capital if you want to keep your business afloat. Working capital is the amount of money that your business will need for day-to-day operations. The amount of working capital that you have is a measure of your business’s liquidity and your ability to pay off any debts. You can measure the financial health of your business by computing the working capital by subtracting your current liabilities from your existing assets.
If your business lacks ample cash on hand, then you can get short-term working capital loans from financial institutions such as Aquamore finance to make sure that your operations keep going.
Working capital loans can also give your company the ability to take advantage of new opportunities that arise, such as investing in a new line of products or branching into new locations.
To Purchase Assets. If you want your business to grow, you must be able to invest in new assets such as modern pieces of machinery or delivery vehicles. Even if you have enough working capital for your daily expenditures, you may need to apply for funding from Aquamore finance to cover new assets that will help your business expand. Use the additional money to upgrade your office and IT equipment, buy new and more efficient machinery, or to purchase a business vehicle.
To Restructure Debts. If you already incurred a lot of debts for your business, you may consolidate all your debts to make payments more manageable. You can apply for a loan large enough to cover all your existing debts while retaining extra funds, which you can add to your working capital. Consolidating and restructuring all your business loans into one will make your financial planning easier since you have significantly reduced the number of repayments to keep track of. You can always consult with Aquamore finance staff to give your suggestions in consolidating and restructuring all your business loans.
Remember that the success of your business will depend on the amount of funding that you have. A lot of business owners make it a point that they only pay themselves a salary from their company once they know that the finances of their business are in check.