There’s no question that tradies make up a huge portion of small businesses in Australia, with many operating as sole traders or self-employed contractors. But what does that mean when looking for business finance?
Well, there are many different things to consider when looking for business finance, and the list is just as long, if not longer, for construction and technical service tradespeople.
Tradies that are self-employed or running their own small-to-medium businesses need to pick a flexible funding option that suits their profession. Here are a few key points to consider when looking for tradie finance:
How Fast is the Approval Process?
While a traditional bank may be the first option for many tradies looking for small business loans, they aren’t always the fastest when you deal directly with a bank manager. You may simply need stock, materials or tools to finish your latest job and, with some banks, you could be waiting weeks or months for funding.
That’s a long time to be waiting to complete a job and could end up costing more in lost time and missed opportunities. At QPF, we hold finance accreditations with major banks and financial institutions, but we also have direct access to smaller niche funders that provide funding for new ventures, specialised assets or applications not suited to major lenders.
We’ve built and maintained strong relationships with our lender partners for more than 40 years, which means we can often provide significantly faster turnaround times.
Does the Lender Require Security?
This one can be a bit tougher for self-employed tradies. Unfortunately, many lenders require borrowers to provide some form of security as collateral for a loan.
While secured loans can be cheaper than unsecured loans, many sole traders and self-employed tradies (and even some SME owners) either cannot or simply don’t want to put up their house as collateral.
It’s worth looking closely at the security conditions in a loan agreement, particularly if the loan is being used for equipment purchases or working capital finance. Depending on the purpose of the loan, the savings may not outweigh the additional risk.
How Long are the Terms?
For some businesses, loan terms may not matter much. However, many self-employed tradies won’t need a long-term loan for something like a new set of tools. Some lenders offer shorter terms ranging from six to twelve months, which can make repayments more manageable.
Ask your Broker to explain different repayment structures and schedules when looking at tradie finance options.
What is the Loan For?
Finally, consider the purpose of the loan. Some of the most common reasons tradies seek finance include business vehicle finance, equipment finance or even machinery finance.
Tradies know better than most the value of quality tools and a reliable work vehicle, but those purchases are rarely cheap.
That doesn’t necessarily mean you need a large, long-term loan. Flexible terms and repayment structures can often be better suited to equipment purchases. Being able to make additional repayments or pay out a loan early without penalties can also be valuable.
For a self-employed tradie, choosing the right finance option is important. Now that you have the basics covered, let us help secure the right solution for your needs.
If you have any questions or want to chat about tradie finance, feel free to give us a call on 1300 736 780 or get a quote.
