How to fund your business

Is there a business owner who relishes the prospect of seeking financing or going over the books?

If you are running a business, then chances are that most of your time is taken up by attracting and retaining clients. Builders are busy focusing on delivering quality craftsmanship and sourcing reliable employees. Doctors and dentists are attending to sick patients and filling cavities. Café owners are working long hours preparing food and serving customers.

Yet whether you are just starting out or well-established, having a plan in place to fund the growth of your business and manage your cash flow is essential to its long-term survival.

Exploring funding options

Business loans

Taking out a small business loan is one of the most common ways business owners look to fund their business and there are a broad range of providers available, from the big banks (like Westpac) to online lenders. Obtaining a loan may sometimes be difficult but there are ways to make your application more attractive to lenders. Check your credit report and clear up credit issues in advance, prepare all your documentation (from bank statements to your business plan) and determine how best to sell yourself before applying for a loan.


Investors can provide a much needed cash injection to help your business get off the ground or grow. Borrowing from friends and family is one way to do this, or you may be seeking a partner to invest and provide the benefit of their knowledge and skillset in your field. Use your networks to gain referrals to potential investors, such as individuals with high net worth and venture capital firms, or consider using an introduction service such as Business Angels. Another option is to source a Government grant or loan – visit Small Business Grants Australia for more information.


An alternative source of finance, crowdfunding allows you to source small amounts of money from a large number of people online. Crowdfunding sites such as Kickstarter mean small business owners now have an opportunity to appeal directly to small investors. However, there are downsides – you will need to do a lot of legwork to pitch your idea before your project launches and if you do not reach your funding target you may be required to return any finance that investors have pledged.

Overdrafts (secured and unsecured)

Relying on credit cards to see you through cash flow issues can be a slippery slope to debt overload. To ensure there is extra money when you need it, consider an overdraft facility. You can opt for an unsecured overdraft or secure your overdraft against any assets you own, such as property or business assets.


Factoring is an increasingly popular way for business owners to access cash fast. It means selling your receivables to a commercial finance company (factor) at a discount. For example, if you have billed a client $10,000, you could sell your invoice to a factor and have 80 per cent of the cash ($8,000) available the next business day. When your invoice is eventually paid by the client, the factor gives you the balance minus a fee, typically 2–5 per cent.

Maintaining a healthy cash flow

Cash flow is the lifeblood of a business and critical to its growth. Every day, hundreds of businesses fail as a result of cash flow issues. So what can you do to prevent them?

Finance Consultant Terri Dillon of Presidio Finance Consulting, has these tips:

  • Take the long view. While your cash flow may be fine today, try to predict cash flow three to six months in advance to avoid running into problems later. Set targets for your sales so you can measure the performance of your business.
  • Stagger large expenses. Business expenses, such as insurance, can mean a significant annual outlay. Taking out an insurance premium funding policy allows you to pay for insurance on a monthly basis rather than taking a big hit once a year.
  • Analyse maintenance costs. If the cost of maintaining old equipment is blowing out, taking out finance to replace equipment or hiring your equipment can actually save you money in the long run.
  • Keep a buffer. With many lenders currently tightening their lending policies, higher interest rates may be on the cards. Consider extending the life of current loans, taking advantage of fixed rates or putting in place additional funding to provide a buffer should your business need it down the track.

Words: Amanda Taylor

The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.