Tag Archives: Alternative Finance

funding4business – 5 common mistakes in raising capital

The 5 most common mistakes made in raising capital.

Venture capitalists are professional investors that provide risk capital to start-up enterprises or to companies that are seeking funding to develop and expand their businesses.

Venture capitalists invest becausre they expect to earn a reasonable retun onn their    funds when they balance risk and return.

For the start-up there are the right and wrong ways to present your business opportunity.

Converserly, for the venture capitalist discerning how to go about finding the right opportunity to invest your funds is no simple task.

Michael Pratt, an experienced venture capitalist and faculty member of University of Maryland’s Master of Technology Entrepreneurship, outlines the five commomn mistakes made when looking for venture capital.

Inadequate preparation
You don’t want to be inadequately prepared for a meeting with venture capitalists. Everything needs to be tight and focused so that you can prove that your business enterprise will be successful and profitable.

Paralysis by analysis
You need to hone your story and present it succently so it addresses the major topics tha a venture capitalist is interested in. Focus and succint are critical.

Ignorant of investors needs
Investors have specific needs and information requirements. You must identify, understand and address these needs. Put yourself in the position of a prospective investor.

Shotgun approach
Randomly sending out your start-up proposal to many venture capitalists, does not generate success or the results. You need to spend time and effort to research the venture capitalists who may be interested in your proposal.

Poor or ineffective management team
The management team that you have to drive the new start-up is critical and most important factor to any venture capitalist. The right idea without the right tem will not succeed. The investor wants to be assured that you have the team to execute the business plan.

Source:-

Michael Pratt Faculty Member – Master of Technology Entrepreneurship

University of Maryland | 2120 Potomac Building | College Park | MD | 20742
www.mte.umd.edu

funding4business – why small business loan applications are rejected

Why small business loans are rejected

A comprehensive study done by the Graziadio School of Business & Management at the Pepperdine University in the USA, confirmed that:-

Approximately 29% of  small business loan applications were declined due to poor   quality of earnings and/or cash flow, and

Approximately 23% were declined due to insufficient collateral.

The complete breakdown of loan application rejection is as follows:-

Quality of earnings and/or cash flow 29%
Insufficient collateral   23%
Debt load   13%
Size of company   6%
Customer concentrations   6%
Insufficient credit   5%
Size or availability of personal guarantees 4%
Insufficient operating history   4%
Economic concerns   4%
Insufficient management team   3%
Weakening  industry   2%
Other   2%

Source:-

PEPPERDINE  PRIVATE  CAPITAL  MARKETS  PROJECT  |  CAPITAL  MARKETS  REPORT – 2014 ©  2013 -­2014 |  PEPPERDINE  UNIVERSITY | GRAZIADIO  SCHOOL  OF  BUSINESS  &  MANAGEMENT.

funding4business – Instant tax deduction

Aussie small businesses – Instant tax deduction – asset threshold increase to $20,000 is now law

Small businesses can obtain an immediate tax deduction for assets acquired costing less than $20,000 purchased since 7.30pm 12 May 2015.

You can use the new threshold amounts in claiming deductions in your 2015 income tax return. The deduction is claimed in the income year in which the asset is first used or installed ready for use.

What’s changed?
The instant asset write-off threshold has increased to $20,000 (up from $1,000). This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

The changes apply to assets acquired after 7.30pm on 12 May 2015 until 30 June 2017,
on a per asset basis, so several assets each costing less than $20,000 would qualify,
to new and second hand assets.

Assets that cost $20,000 or more (which can’t be immediately deducted) will continue to be deducted over time using a small business pool.

The low pool value threshold will also increase to $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year.

What’s not included?
There are a small number of assets that aren’t eligible for accelerated depreciation, for example horticultural plants that have specialised depreciation rules.

Record keeping
Just like any other business asset, you’ll need to keep records to support any claims for a deduction. This includes the ongoing business use of an asset and its eventual disposal. The ATO has a risk-based program to identify taxpayers that are not meeting their obligations and will take measured approaches to influence taxpayer behaviour.

Find out more at:- ato.gov.au
Growing Jobs and Small Business – expanding accelerated depreciation for small businesses

funding4business – technology shocks coming for Aussie banks

funding4business – technology shocks coming for Ausssie banking

The Murray Financial Inquiry of 2014 into Australia’s financial systems has predicted that technology changes and market disruptors using new technologies will have the largest influence on changing the banking system in Australia, as we know it.

At the forefront of this change is the emergence of peer-to-peer crowdfunding in Australia.

Charles Moldow, General Partner, Foundation Capital in the USA, in a recent report titled  “A Trillion Dollar Market by the People, for the People”, claims that “peer-to-peer marketplace lending will over the next few years, remake banking as we know it”.

Today technology and innovation are making possible a new generation of financial services that are more affordable and more available. That’s why Moldow, believes that “marketplace lending” will evolve to be a trillion dollar “market by the people, for the people”.

Foundation Capital predicts that by 2025 $1 trillion in loans will be originated in this manner globally.

The peer-to-peer crowdfunding industry rose to prominence in the USA & UK during the onset of the Global Financial Crisis in 2008, plugging a hole left by the reluctance of cash-strapped banks to lend to small businesses.

Consequently it has created an opportunity for non-traditional lenders through peer-to-peer platforms to cater to the growing demand for alternative business financing options and directly connecting borrowers and investors

For the first time in banking, the online marketplace makes it possible for a third party to match financial supply and demand. As a result, lenders and borrowers can now find one another and agree to loan terms, all without the involvement of retail banks or credit card companies.

The San Francisco based LendingClub Corp, one of the USA’s largest operators in the online peer-to-peer marketplace, has facilitated more than US$5 billion in loans since its launch during the GFC in 2007. This shift to a peer-to-peer crowdfunding is not unique to the USA.

The major UK networks providing these investment options include, Funding Circle, CrowdCube, Zopa and RebuildingSociety. Funding Circle alone has facilitated over GBP400 million in business loans in the UK over the four years since establishment.

See Charles Moldow’s complete Foundation Capital report here:- www.foundationcapital.com/downloads /foundationcap_marketplacelendingwhitepaper.pdf

funding4business – Minister for Small Business Bruce Billson endorses Crowdfunding

Minister for Small Business Bruce Billson endorses peer-to-peer crowdfunding

The Hon. Bruce Billson the Federal Minister of Small Business reinforced the government’s commitment to supporting peer-to-peer crowdfunding at a presentation at the Australian Stock Exchange (ASX) on 30th April 2015, whilst launching an independent report titled:-

“Alternative Finance in Australia – Private investment, disruption, fintechs & crowdfunding”.

The Federal government sees crowdfunding as a way forward into breaking the stranglehold of the major banks in the provision of finance to small businesses, and will introduce new legislation in the Budget Session to make the process easier for lenders and borrowers.

The peer-to-peer crowdfunding industry rose to prominence in the USA & UK during the onset of the Global Financial Crisis in 2008, plugging a hole left by the reluctance of banks to lend to small businesses. Securing finance from the banks in Australia today is no different.

However, the arrival of crowdfunding on-line marketplaces in Australia and New Zealand is providing a viable alternative to small businesses who are seeking business loans. It enables them to explore alternative sources of funding and bypass the banks and middlemen.

With true peer-to-peer crowdfunding there are no banks and no middlemen, and the Internet based marketplaces enables farmers and rural businesses borrowers to connect to lenders and investors directly, by searching and matching on appropriate investing and borrowing criteria.

Once a suitable match is identified, the business borrowers and lenders/investors can optionally exchange contact details, discuss and potentially negotiate the terms and conditions of a possible loan or investment on mutually acceptable terms.

funding4business is one such peer-to-peer marketplace and lists business requiring loans, start-ups requiring seed or equity funding, investors and private lenders seeking secure investments for their available funds.

We are not a bank nor a finance company and we do not lend and or administer loans.

We operate the marketplace and facilitate introductions.

funding4business allows lenders and investors to achieve better returns on their investment funds, while potentially offering lower than bank interest rates for borrowers. Investors choose the risk they want to take and the borrowers with whom they feel comfortable and secure and visa versa.

Listing in funding4business marketplace is simple, quick and free.

funding4business – only 10% of total bank loans are to small business

EFIC states only 10% of total bank loans are to small business

In the recent submission by EFIC to the Murray Financial Inquiry, the report provided some very interesting statistics into current status of Australian banking loans.

The report stated that in Australia residential mortgage loans represented 63% of all bank debt while loans to small businesses only represented 10% of bank debt.

This is in stark contrast to the USA where housing loans represent 34% of total bank debt and 40% of total bank debt in Canada.

Business loans in Australia representing 10% of bank debt pales into insignificance when compared to 80% of bank debt in countries like South Korea and Switzerland.

funding4business agrees with the EFIC submission in that, new innovative and successful established businesses in Australia are being deprived of funding from the major banks to expand their job creating enterprises, which in turn has an adverse effect on the growth of the Australian economy.

This is why smaller Australian businesses today are turning toward peer-to-peer (P2P) marketplaces, where lenders and borrowers can now find one another and agree to business loan terms, all without the involvement of retail banks or finance companies.

The P2P lending industry rose to prominence during the onset of the Global Financial Crisis in 2008, plugging a hole left by the reluctance of cash-strapped banks to lend to small businesses. Peer-to-peer (P2P) lending lets investors lend directly to individuals or businesses and uses low-cost online platforms to cut out the banks and other financial institutions.

Peer-to-peer (P2P) lending acts as an affordable and flexible alternative to expensive bank loans, where businesses can borrow funds and negotiate business loans directly with willing lenders at mutually acceptable rates and terms.

funding4business is the first and only peer-to-peer (P2P) open and transparent marketplace in Australia, specifically established for providing business loans, connecting Aussie business borrowers to Aussie lenders for mutual benefit.

The funding4business marketplace is open and transparent, offers potentially lower interest rates, faster settlement, online registration and algorithmic loan matching as the norm. P2P lending is a win/win situation for Aussie borrowers and Aussie lenders.

funding4business as the name suggests, targets the small established business borrowers requiring loans between $25,000 and $100,000 backed by directors or owners guarantee and or loan security.

funding4business launched in Australia on 1st August 2014.