3 min

Being Debt Ready

At Balanz, we view debt as the gap between what a business owner wants to achieve and their available equity to achieve it. However, it is not just any debt as the wrong choice carries consequences. The right debt should always represent the lowest risk possible to the Borrower with a simple but thorough process of working through options (not just going to the easiest and quickest solution). There are a couple of parts to this:

  1. What is the business owner trying to achieve? This is not just the immediate purpose but more importantly the next couple of things after that - there is no point in satisfying today to sabotage tomorrow as most business owners have a long term vision they are executing.
  2. What is the available equity? We're not sure what comes first - the available equity or the available debt. The conversation just needs to be understood in full with the right questions asked and the requisite pre-work done.
  3. What debt is available? The debt available will certainly depend on a number of things which we will explore in subsequent articles/posts.

However, a number of key pieces of information are always going to be required as you move through this journey so it is best they are addressed upfront:

Good information:  Good business operators seem to have combined a great gut feeling with a lot of hard work but always backed up with timely and accurate information. That usually means monthly reporting, a level of cashflow planning and a good Accountant who prepares information in a timely manner.  

Back a winner:  Good people know good people. That's true and a simple CV statement of past triumphs and tribulations is an effective way to communicate that through to a bank Credit Manager who is ultimately reading the request for funding. Keep it very succinct and remember numbers tell a story more than words do when it comes to finance.

Good behaviours:  We're not here to pontificate on what is right and wrong - we will leave that to TikTokkers. What we do know is that banks have a view on what unacceptable behaviour is and, once formed, that view will be extremely hard to alter. Some things they don't like are when accounts are regularly overdrawn; superannuation contributions are not paid; when ATO arrears form, and when simple Google searches bring up historical issues. Obviously issues on credit reports also fall in to this category. Stuff happens at times - if any of these exist but are an anomaly then we just have to be upfront about it and explain it.  The worst thing to do is hope it doesn't get detected.

Business owners have a thousand balls in the air at once - we get that. And many financiers seem to place endless hurdles in the way when debt is usually sought at critical times. What Balanz does is work with our clients so they are at all times debt-ready. This reduces the time to debt availability, and means that our clients are ready to take advantage of opportunities. Given the current economic reset, wouldn't you be best placed being debt-ready?

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