Funding a bigger opportunity before it starts paying

The timing problem in growth

The video makes one point in thirty seconds: an opportunity can be real and still arrive at the wrong moment for cash flow. A larger contract, a second site, a supplier offering volume pricing, a customer who wants twice the order: each one needs money spent before any comes back. Stock has to be bought, equipment installed, staff hired and trained, and weeks pass setting it all up. Income follows later, and later again if the customer pays on 30 or 60 day terms.

Working out what the opportunity actually needs

1. The upfront cost. Stock, equipment, fit-out, bonds and deposits: everything paid before the work starts.
2. The running cost until income arrives. New wages, extra rent, the stock that keeps supply going while the first invoices are outstanding.
3. The time to first payment. Read the contract's payment terms rather than assuming them.
4. A margin for delay. First payments are often late. A few extra weeks of running cost is cheaper than coming back for more.

The first two, carried for the length of the third, plus the fourth, is the figure to borrow. It also tells you whether the opportunity is worth taking: if the numbers only work when everything goes right, a loan magnifies the risk rather than the reward.

Why a bank often says "not yet"

A bank lends on what a business has already earned. An opportunity larger than the current turnover is, almost by definition, one the current figures cannot support, so the bank wants to see the new income before lending against it. By then the opportunity has usually gone to someone who could say yes sooner.

How a property-secured loan fits growth

HomeSec lends against equity in Australian real property, up to 80% of a residential property's value or 70% of a commercial one, less what is owed. The size of the loan comes from the property, not from last year's turnover. Interest can be capitalised for up to 6 months, which covers most ramp-ups, and the term is open after that. The exit is the opportunity's own income, or a refinance once the larger business has the trading record to show a bank. The written guide on how to fund a business expansion sets the options side by side, including the ones that are not a loan.