I am thinking of leaving a full time role to set up my own business but concerned about the initial cashflow. Everyone is telling me to go for it so I’d like to ask about finance and can I extend my home loan before starting the business. The unit is probably worth 500k and the home loan is $210k. Is this a good way to get started as I already have a number of clients in the waiting?

Hi Jacqui

First congratulations on the decision to start your own business. It is a very exciting time I am sure and all the best!

Most people do use up the equity in their homes to start a business as banks are not too keen to finance the startup of a business just on its own. So I believe it's the way to go.

Do have a budget and a cashflow projection as a start and you can adjust it as you go and things become clearer. Though things will rarely go to plan, it will help you keep measure of things.

Hope this helps.

Jacqui,
As Suresh has already pointed out, banks are reluctant to fund business start ups & I have a number of clients that use equity in their own home to start a business. It is a relatvely simple process of applying for funds for investment purposes.

happy for you to call me for further guidance.

Peter

Hi Jacqui,

Sounds exciting!

I take it when you say "extend" your home loan, you mean to "cash out/draw" on your equity?

Although some lenders may allow this as an acceptable reason, an issue through the application process might be around being able to answer the responsible lending question "Are you aware of any changes in the future that may affect your ability to repay this loan without financial hardship?"

Please note that this information is general in nature and I would recommend you contact a mortgage broker in your area to go through your situation in more detail to find out what's possible for you.

Also this is just a suggestion, perhaps it might be a good idea to get in touch with a business coach or consultant to get an idea of how much start up capital you will need, how long it will last and plan your way to break even etc.

Good Luck!

Cheers,
Frank

Hello Jacqui,
As the other guys have already pointed out, there are plenty of things to consider when setting out on your business venture. The first thing to consider is what do I do if this falls flat on its face? It is an undeniable fact that most businesses fail in the first 12 months. And the thing that kills them in almost every case is cashflow.....or more accurately a LACK of cashflow.
You need the help of a qualified and experienced CA or CPA to help you get your business off the ground and operating efficiently. You need to consider all sorts of things, like
should I set up a company, a partnership, sole trader or trust?
what are my cash commitments over the next 12 months?
How am I going to generate the cash?
How am I going to keep track of business income and expenditure?
What capital investments do I need to make? DO I need to lease hire or buy equipment? What about a business premises?
Do I run my business from home? Are there tax considerations if I run my business from home (tip:YES!!!).
Do I need to employ staff?
What risks to I need to consider?
What insurances do I need?
What are my tax and reporting obligations?
DO I need to register for GST/PAYG W/ etc??
How do I report this stuff to the ATO?
Who is my competition?
How do I make myself known to my clients?
the list never ends......

If you have an accountant you trust, spend the time (and money) to find out what you need to know before you take this leap. Remember the 5 "P"s: Prior Planning Prevents P$%^ss Poor Performance. the money and time you invest before committing to a strategy will pay for itself tenfold!!
good luck!!!
Brendan

Hi Jacqui,

All top answers,

Before you go and use your money on a business venture there are a few things you should really ask yourself.

1. Should you be in business?

2. Is there a market for you goods or are you friends just telling you its a great idea?

3. When will you run our of cash?


Did you know that 10,000 companies go into liquidation every year and really 10,000 people go bankrupt?

Answer those first 3 questions before you go and spend a dime and also remember MVP. Minimum Viable Product. What is the cheapest and quickest way to get a product out there or service.

Good Luck!!

AJ