Why take out a small business loan for your trade business?
Whether you want to start a new trade business or you need funds to expand your existing business, small business loans are a necessary part of your journey and growth. You may need money for new equipment, tools, work vehicles or simply to manage your monthly cash flow cycle. Having a good Finance or Mortgage broker by your side that understands tradie business needs is key to helping you achieve your short and long term objectives.
What types of small business loans are available for tradies?
You will be surprised at the variety of loans available to you as a builder or tradie when you consult with a finance broker. It may all depend on the amount you need to borrow and your financial history in order to determine the best loan option. Each loan works different in terms of interest rates, loan repayments and security requirements.
A small unsecured business overdraft may be suitable to manage short term cash-flow needs. The interest rates on an overdraft may however be alot higher than a secured loan.
If you need a larger loan, it may need to be secured against what you are purchasing (say a vehicle or piece of machinery). Loans can be structured as regular instalments or interest only for a specific period. The payments you make on a loan are determined by the amount you borrow and the interest rate available to you.
A line of credit or equity loan is also a popular solution for many trade business owners. They are one of the most flexible types of small business loans that allow you to draw on your account balance based on an approved limit. The interest rates on this type of loan is usually lower than a business overdraft account. Equity loans are secured against your property, so you do have to make sure you pay on time to prevent repossession.
How to prepare for a successful loan application?
Start by speaking to a good mortgage broker as earlier on as possible in the process- even if you don’t need that loan for another 12+ months. By doing so you will have a much clearer idea of what you are eligible for and also what financial targets you need to achieve over the next 6-12 months in order to qualify for a future loan.
Any loan application will need to be supported by solid financials. It is important that your personal and business tax returns and business accounts are as up-to-date and accurate as possible. As part of planning ahead for a successful loan application, you should speak to your book-keeper and accountant and let them know of your future plans so they can help you work towards producing solid financials.
Builders and construction loans
Builders can qualify for small business loans like any other tradesman, but sometimes they require mortgage type loans for constructions. Mortgage Brokers can help with construction loans. They will know which one is best for your needs after you consult with them.
If you do need a good finance broker or mortgage broker to help you with your tradie business, try contacting one from our Tradebusters Academy network. These professionals specialise in helping tradesmen in business and we are sure one would be a good choice for you.