We live in challenging times, and the impact on business owners’ financial arrangement with their business might be critical over the coming months/years. Now more than ever it’s a risk that every business owner funding a business needs to be accross, and have the right structure in place

The 2008-09 global financial crisis brought about a huge uptake in people becoming business owners. It’s safe to assume COVID-19 will have a similar impact. Starting and running your own business is one thing. But financing is something else. For a startup, an expanding business or one just working hard to get along, finance is the biggest challenge facing a business .

Will economic conditions ahead put more pressure on founders to bankroll their businesses Should you dip into your savings to help fund your business. Should you ask for financial support from a friend or family member 

We know that founders are the largest source of finance for a business but what about friends and family.  In June 2020 Credi.com commissioned / orchestrated a survey of 1,036 Australians, including 631 business owners. Of the 631 Business owners, nearly 89% said they had experienced difficulty securing finance or capital to start or grow their business. When asked if they had considered asking a family member or friend for a personal or business loan, 81% of total participants said they had, and when asked if, the current economic pressure made them more or less likely to take a loan from someone they knew personally 90% of Business owners said they were more likely. 

If you ask any accountant, or business advisor they will tell you that you need to separate your personal finances from your business finances – it just makes sense. If you are covering business expenses personally –  that’s a line of credit arrangement . It should be documented, and if necessary further protection may be a good idea .  It’s not just a good idea for the founder to have these loans documented – its good for the business. Conversations with business lenders , banks and non bank lenders highlight the delays and necessity for further enquiries that can hold up a business  loan application when an undocumented  loan account is carried on the company balance sheet – its a loose end that needs tidying up.

Back to the fonder though. If you’re going to be a ” bank ” to a business , do as the banks do. A platform like Credi.com  can help you establish the loan and then register a secured charge over the business assets on the Australian  Personal Property Security Register. Being registered as a secured creditor, safeguards your investment and puts you at the front of the line it if things don’t go as planned.

You wouldn’t drive a car without insurance. Why would you invest in your livelihood without a safety net?