Business Finance
Business Finance In Australia
A business enterprise can take many forms; a business can be set up as a sole proprietorship, partnerships, limited liability companies, corporations, among others. These essential features of a business include but not limited to the following: a business is a form of economic activity, it could have a profit or non-profit motive, involves the acts of buying and selling, customer satisfaction, among others. According to the Australian Bureau of Statistics, in June 2020, there were about a 2.5million active businesses in Australia. And despite the devastating effects of the Covid-19 pandemic, there was a 2% increase in the number of businesses, which accounted for about 46,651 entries and about 14.5% entry rate, which accounted for about 344,472 entries.
The growth in businesses in Australia has, over the years, come to reflect the general desire of Australians to seek an alternative means to wealth generation aside from the usual white-collar jobs. More and more Australian households have been setting up businesses, and according to data from the Bureau, in 2019-2020, the Australian households accounted for about 52.3% of all businesses in the country, making it the biggest of any other economic sector. Also, there was about 1.4% growth in households and a 2.7 increase in non-financial corporations. However, the growth of businesses in the country should not come as a surprise to many because the benefits of owning your own business, no matter how little, are sound considerations for anyone interested in running a business. This is because owning your own business does not only provide you with an alternative source of income; it also helps you work at your own pace and desired schedule while also serving as a security for any financial arrangement you may wish to execute.
However, owning a business may not come with the ease that may be expected, especially when the funds or capital necessary for setting up one is lacking. Business finance is the oxygen that is necessary for the growth of your business, and getting access to finance will go a long way in actualising your business dreams. This should not be of worry to you as we shall be guiding you on the available options to finance your business in Australia; you can also contact our team of experts should you need any clarification whatsoever.
Bootstrapping
The first option available to any business that wishes to set up is for the owner{s} to invest their capital into the business. This involves investing your own funds into the business, usually at the start stage of the business. This process is what is called bootstrapping. Not all businesses may need a huge capital to set up, and as such, where the business owner has considerable funds to invest into the business, it is advised he does so. Bootstrapping has the advantage of the owner keeping all interests in the business to himself as he won’t be liable to give up the to a financing company should he default on a loan term.
Family and Friends
Another option available to a prospective business owner in Australia is to solicit funds from members of his or her family and also friends. This is probably the least difficult method of accessing funds for your business enterprise as members of your family and friends would be less inclined to put you through the rigours of defending your business plans or ideas before them. The major risk of engaging in this method is the possibility of mixing your business with your private life, and more often than not, this does not augur well.
Venture Capital
Another business financing option available to a prospective business owner is venture capital. Venture capital is a type of private equity investment for a business that generally has a high-growth potential. Venture capitals provide potential business owners with the much-needed funds for their business. This usually involves presenting your business plan before the board and getting to convince them as to the merits of funding your business. The downside to this arrangement is that you would end up losing a sizable amount of your company’s equity, and the venture capital would be actively involved in the management of your business, meaning that you may not have the power to make all the decisions.
Bank Loans
This is one of the oldest forms of financing a business in Australia as banks which remains largely in practice. The process of seeking a bank loan involves submitting a proposal before the bank stating the amount sought for, the purpose of the business, security for the loan and a business plan. In most instances, the banks require collaterals as this would serve as a security for the loan in case you default on the repayment plan. This method has the advantage of the business owner retaining most of the equity in the business as banks rarely require you to give away any part of your equity. The interest rates should also be carefully considered, as that would be repaid alongside the initial loan amount. So, ensure that the interest being offered is a sum you can pay within the given time frame.
Government Grants
Another finance mechanism available to a potential business owner is government grants. Government grants offer the much-needed capital to start your business and generally involve certain areas of business. The government could offer grants to boost the growth of a particular sector of the economy. As such, it is essential to properly investigate to know if your business qualifies for a grant.
In conclusion, financing a business involves various mechanisms, which we have highlighted above. Therefore, should any of the aforementioned methods appeal to you as you seek to set up your business, do not hesitate to contact us for guidance, as our team of experts are readily available to assist in making your business dream come into reality.
Disclaimer: This information is only available as a general guide on the government policies. It is derived from the official Australian government sources. We do not bear any responsibility for the commentary and analysis of this public domain information nor any liability for how the facts are interpreted. It is recommended that you speak with an accountant or financial advisor to get precise information and advice on your situation.