Which Industries Have High Funding Potential?
We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’
Here’s what he said –
These industries are by no means exhaustive. It just highlights a few of the industries where a lot of banks have specific policies around lending to these industries. So, accounting, insurance, legal, etc. that the banks have enough exposure and comfort across these industries to design specific policies. I suppose provide a lot more guidance around how they are going to be structured, but it potentially gives us access to a higher level of funding because the bank has a certain comfort and a certain policy around these types of industries.
Anything that sort of falls outside of this, doesn’t make it any easier or harder to fund, but it falls back to standard business assessment criteria, as opposed to a specific policy around these sorts of things.
Each bank we deal with has a different policy that relates to accounting industries but they all have a particular policy around how we might lend to an accounting business or a financial planner, or a doctor. They will look at those sorts of things. There are specific industries that will have certain policies. As long as we can understand the business, the repayment, and the security, then we can still put a good application together and have a good conversation with a funder around putting some facilities in place.
Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition
5 Types Of Employer Sponsored Visas
We recently invited Michel Sulzbach and Erica Carino, directors of Bravo Migration to a webinar on the topic, ‘Hiring Temporary Residents on a Visa’
Here’s what they said –
The options under temporary visas would be the 482 TSS Sponsorship Visa, which is the old 457.
In 2017, the Government woke up and said, “We’re abolishing the 457. No one else can be sponsored. But we’re implementing the 482.” Which is pretty much the same thing with a few tweaks. The 457 was on the news all the time. So what the government did is, “Let’s scrap that out and start with a new number. And people will think that that’s something completely new,” which wasn’t the case.
Then we have the 407 training visa which is also a sponsorship visa and this is important especially to those in the health industry. When you bring someone from overseas, a lot of the health professionals have to obtain registration in Australia before being able to work autonomously in their position.
Instead of going for the 482, we go for the 407 which is being sponsored by the company. But during that time for a maximum of two years, they were working and going through the process of obtaining their full registration to work in Australia. And then once they get the full registration, we either go for the 482 or the 186.
Then we have the 494, which is a regional visa and very similar to 482 as well. And we have the 400, which is a short stay business visa, usually for up to three months and it’s only granted from offshore.
And the permanent visa option is the subclass 186.
Watch the full webinar, ‘Hiring Temporary Residents on a Visa’ at https://learning.benwalker.com/courses/hiretempvisas
Can You Get A Loan For A 6-Month Old Business?
We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’
Here’s what he said –
6 months trading is not a huge amount from a bank’s point of view, but certainly you would need information up to date and a very comprehensive and rigorous forecast on where that business is going and the assumptions behind that. So that might be a new contract has been won for the business, which is going to generate X amount of cash flow that the bank can then rely on.
But, it will also be a thorough understanding of the current business and the new business and how they might be working together. So, there would be a lot of research around both businesses and the ability to repay. Certainly not impossible to ask, but 6 months trading is not a lot for the bank to work on so it’s going to be really around how we can understand the story and convey that message to the bank for them to be comfortable.
Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition
Do This To Prevent Late Payments From Clients
We recently invited Joanna Oakey, Director of Aspect Legal to a webinar on the topic, ‘The Legal Challenges of a Growing Business’
Here’s what she said –
The reason for non-payment and slow payment, is a lack of provision in your client agreement when they don’t pay on time. You have the right to charge interest and the right to charge administration fees. I’ve seen some great examples of business owners adding discounts for early payment or discounts for on-time payments.
That is sort of a different way of posing fees and an alternative to imposing fees for late payment. You should be thinking about utilising your client agreement to help ensure that you have the right power behind you to enforce on-time payment, if you’re not getting it from your clients.
We deal with the expectation first between the parties and you should be using client surveying tools like MPS to make sure your clients are happy as well. You should also have the power that sits in a client agreement, to ensure that you have the right to enforce things from a financial perspective to enforce things from a financial perspective that will make it increasingly likely that they will want to pay on time.
Watch the full webinar, ‘The Legal Challenges of a Growing Business’ at https://learning.benwalker.com/courses/legalbusinessgrowth
The 2 Main Ways To Manage Purchase Structures
We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’ We asked him if he had any insights into the two main purchase structures.
Here’s what he said –
In regards to the shares in the business, if you are buying shares in the business there are whitewash provisions. It’s a section in the Corporations Act that we need to be aware of when buying shares in the business, and it can particularly be triggered if the business is providing a guarantee back to those owners to link in the income from that business, so it is something we need to be careful of. Banks and finance brokers will engage with accountants and bank’s internal lawyers to make sure that process is completed correctly and doesn’t leave anyone exposed to any sort of breaches of the Corporations Act. That is certainly one instance where someone will just come in and buy the owner shares in that business and continue to trade that business.
Other instances are where you come in and particularly you buy the business, and brand. You may change the brand of the business and roll that up into your own business. That probably comes down to a conversation with your accountant as to the most appropriate structure for you in terms of funding that business.
Regardless of the structure you decide to proceed with; whether you’re going to buy shares or the business as a going concern, and whether you’re going to structure that as a company, a trust, or a sole trader – as long as the banks can understand that structure and how that’s going to work and identifying any potential implications around whitewash provisions. The bank’s will work with that structure to provide a finance arrangement.
It may vary some of the information that needs to be provided and also the way the security is structured because you don’t get a director’s guarantee. For instance if it’s a sole trader who is buying the business, the sole trader is automatically liable. Those sort of things will need to be understood and confirmed when we present something to the bank.
Structure is relevant for every party – the lawyers, accountants, bank, and the owner are involved, so if there are future parties buying into the business and there are more acquisitions and personal tax positions, it will all come into consideration when setting up what sort of structure you’re going to go with when you buy that business.
Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition
What You Must Know About CapEx
We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’
Here’s what he said –
It is important to understand when you are buying a business that there is often a purchase price. You might have to buy some stock, but if that business has a high level of core trading or working assets in their machinery-type equipment, it is important to understand the useful life of those assets and where they currently sit within that useful life. Because, if in 6 months time you have to replace half of your plant and equipment, you need to be able to forecast and budget for that, and also understand whether you can finance that.
It is important to understand what operating assets are in that business and what future requirements you may have around those assets to ensure that when you approach a bank at the start, you can get appropriate finance for any future requirements around that.
Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition
How To Reduce Personal Liability As A Director
We recently invited Joanna Oakey, Director of Aspect Legal to a webinar on the topic, ‘The Legal Challenges of a Growing Business’
Here’s what she said –
Be aware of where your financials are. Keep regular communication up with your accountants. If you’re in financial distress, don’t put your head in the sand, deal with it front-on, have those discussions with your lawyer and his team to make sure you’re on top of understanding what to do in this situation.
Don’t sign personal guarantees, and protect your assets. They’re the main things but also be aware of all these. OH&S is another area of key potential risk as a director if you’ve got employees that are on building sites or things like that, that might be particularly dangerous.
Watch the full webinar, ‘The Legal Challenges of a Growing Business’ at https://learning.benwalker.com/courses/legalbusinessgrowth
The 4 C's Of Funding
We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’
Here’s what we said –
First is the ‘Character’ of the business. A fairly decent and a sort of low risk approach in terms of their makeup and history. Second is the ‘Capacity’ to repay, which is like when you get a house and they want to check your income can repay the debt.
Next is ‘Collateral’ in case that scenario doesn’t work, you should consider selling everything and still have your money back. And the last one is ‘CapEx’, is just making sure you’re not buying something that needs heaps more cash anytime soon.
Understand what is planned for and if it is asset financed, the bank may provide a pre-approved asset finance limit so that when the time comes to replace that piece of machinery, the funding’s already in place to convert and turn that over. At least you will know that you have got that side of things covered.
Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition
How Border Closures Affect Workforce Participation
We recently invited Michel Sulzbach and Erica Carino, directors of Bravo Migration to a webinar on the topic, ‘Hiring Temporary Residents on a Visa’
Here’s what they said –
A lot of the applicants that end up being sponsored by companies in Australia and end up being absorbed by the workforce, those are people that are coming here initially not on permanent visas, otherwise they wouldn’t need this sponsorship, but they’re coming here on other temporary visas such as visitor visa to a lesser degree, but mostly student visas and working holiday visa maker.
It’s not only the farmers that struggle once working holiday visa makers cannot enter the countries, but a whole bunch of industries. Because these skilled workers come in initially to study or to travel, depending on their capacity to look for a job and enter the workforce, but when they do end up, and there’s a click and synergy between them and the company, that’s where the whole conversation of sponsorship starts.
We see more often than not companies saying, “Look, this person has a particular limitation on their visa. I want to sponsor them so they can work full-time for us.” So that’s how this whole pipeline is built. With the borders’ closure is not only these new potential skilled workers are not coming in, but we had a whole bunch of people leaving the country as well, especially during the lockdowns.
A lot of people ended up leaving the country. We had a negative net overseas migration of about between 60.000 and 90,000 people last year. So it was the first time since the First World War where we’ve had that ridiculous amount of people leaving the country in comparison to people entering the country.
There is movement, but at the end of the day, we’ve had between 60,000 and 90,000 people leaving more than entering the country and that’s obviously affecting a lot of our clients in terms of sourcing and absorbing staff. Now that we’re back on track with the economy recovering, this is where we need staff the most, and that’s where things are becoming super challenging.
Watch the full webinar, ‘Hiring Temporary Residents on a Visa’ at https://learning.benwalker.com/courses/hiretempvisas
Time Frames For Funding Transactions
We recently invited Scott McGregor, Commercial Broker at Mortar Finance to a webinar on the topic, ‘Funding Your Next Business Acquisition.’
And we were asked, “Can you provide some insight around time frames? How long do the transactions take?”
Here’s our answer –
It is bank specific and potentially the size of the transaction as well. From a business banking point of view, the banks have SME type areas, and they have larger departments that look after different sized businesses. The size of the business and the funding requirement can impact on the turnaround. If there’s a specific industry policy that we’re working towards, that can impact on the turnaround. For instance, if we’re working under a specific industry policy that goes to a banker that is specialised in that industry, that may turn around quicker than if we’re in a general business environment that’s not industry specific.
We would have a conversation with a number of different banks, as well as their policies and processes and interest rates. We would also be asking them how long it’s going to take them to put an application together. And the difference between 4 and 6 weeks, or 1 and 2 weeks could be the difference in the lender that we actually choose to go to because there might be a business that you’ve got a due diligence or finance clause on that you need to meet.
If we are aware that there is 30 days due diligence, then we are going to look to lenders that are going to be able to deliver an outcome within that 30 days. As a rule of thumb for buying a business, a due diligence period of probably 60 days is at a minimum because there are a number of things that need to be worked through with a business purchase, a little bit different to a home loan. You will need to engage accountants and solicitors to do due diligence around the lease, around vendor financials, preparing a forecast, and doing a business plan.
If you are looking at funding against assets within that business, the bank may need to get valuations done on those assets and may want to value the business depending on the type of business that it is. Those processes can take longer than a residential purchase contract, where we might be reviewing some PAYG payslips and a purchase contract. The nuts and bolts of getting a business application together can take longer. It is generally recommended a minimum 30 or ideally 60 days as a due diligence process just to make sure that you’ve covered off on everything within that process but that means you have made the right decision when you buy that business.
Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition
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