All Topics / Help Needed! / Embarrassing but need advice and help on small business!!

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  • Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi All,
    We are in a bad place with our small bussiness. We bank with the CBA and we have just got a email saying we will no longer pay out any amounts once your account is overdrawn.

    Know this is going to have a huge impact on our bussiness because we own a tattslotto shop we have to pay out people who win and if we dont we get fined by tatts. Another problem that has occured is that our bussiness loans are tied up with our overdraft account. This has also caused greif becasue i had put 4k for my loan but be time the loan was due. 2k had been debited to tatts for the scrathies we have activated. So we missed 1 loan.

    They used to cover us before and know they dont. And as of this thursday if we can pay tatts for any of the scrathies or even tatts prizes we will be wiped out.

    We feel like saying here ya go banks here is the keys take it so we can move on. I work full time some where else and our home sisuation is really good. We dont have much of a loan at home and we live very comfratable and we have no other debts.

    Our bussiness loan is 565K and where afraid if things stuff up what will happen?  Has any one else been through this???

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Johann

    Sounds like you are in a bit of trouble.

    Are you running this through a company or sole traders?

    It sounds like you may not meet the test for solvency as you cannot meet debts when they are due and payable. You should be very careful now that you do not commit any illegal acts such as trading while insolvent.

    Do you have any equity in the busniess?

    What is the security for the business loan?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

     Hi Terry,

    At 27 i am being tested. I have learnt alot in the last year in owning a bussiness. There is no equity in the bussiness becasue we have only had it for one year.

    Our Home is being used for secuirty and we are trading as a company under a trust.
    what do you mean by should be very careful now that you do not commit any illegal acts such as trading while insolvent

    Its hard to imagine that banks are meant to be partners and when things get tight they bail on you.
    We have the bussiness on the market but we feel like giving the shop to the bank and say here ya go if its that easy then do it.

    You have any advice???

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You should probably see a lawyer asap. Do you see any way out with cashflow? any money expected to come in?

    You may have to appoint an administrator to the company.

    If you are trading while insolvent then you could be personally liable – the directors could be personally liable.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of JaSin66JaSin66
    Member
    @jasin66
    Join Date: 2011
    Post Count: 30

    I’m pretty sure we paid extra to make that a feature of our home loan with ANZ, it was so our repayments would never be missed if the account was low thus keeping a good payment rating, if we do go over we are however charged $6 a day in overdrawn fees. Maybe it’s a case of you refinancing with someone with this available feature. I am however not sure what the overdrawn limit is.

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    Hi,

    You got nothing to be embarrassed about; small business is a tough business especially given the current market.
    I had past small business who has been in a similar situation, from what i observe:

    1. You can try to work it out with the bank- but 8/10 the bank will say no to extra funding or a higher overdraft – your already in debt…if they release more it be harder for them to chase up and recover.

    2. Re-finance is only a option IF you have a clear exit strategy and Business plan with financial supported by your tax accountant – If a bank can see your in toruble, there is no way they would let you refinance to them just to make a few quick buck.

    Possible Solutions that i have helped some client with:

    1. If cash flow is a problem- consider a Business angel- where a investor will give you a lump sum for a % ownership of the company + repayment
    2. Speak to current bank and work it out- seem to work most of the time, come armed with solid exit strategy and Business plan with financial supported by your tax accountant; dont say ” i think this will happen…. IF we do this this will happen etc…it should be like this.”

    3. Defer Tax for the 3-6 month, speak to accountant and ATO about this…but possible to defer the tax for a period of time so you have better cash flow then pay back with interest.

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi Guys,

    The last couple of nights have been great. I had sat down for a few hours and planned a exit strategy and  bussiness plan.
    I think i got a bit anxious becasue its my first bussiness. The bank said your not going down you just need to manage the cash flow better.

    So we have done a few things to make our overall cash flow better
    Personal cash flow: We have cut down some expenses – And we are getting married in 6 weeks even though we are having a small wedding we have also cut more things.
    Are overall cash flow for home is great.

    The shop:  We have cut some cost down – Also we know what our budget is per day so any extra profit per day will go towards the loan.

    We also have our shop on the market so as long as we can pay the loan and other things back wll move on.

    Its been hard on me and my wife a bit of tears here and there but at 27 im very proud of what i have done. After we sell the store i think 1 year off from investing and just focus on the career.

    Cant wait to the future
    Cheers

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Sounds like a good decisiion.

    Running a business is not easy, extremely risky and very stressful

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544
    johann22 wrote:
    The bank said your not going down you just need to manage the cash flow better.

    Hi Johann,

    This comment, along with your following comments, caught my eye.

    It seems as the bank believes what you have is sound and sustainable. I wonder if you woudln't also benefit by an appointment with small business advisory service, banks finance office, accountant, business coach etc.

    I would also assume anyone buying the business will want to see your books so any tidying up you do to increase profit margins will also increase potential sale price.

    Pruning of expenses along the lines of what you are doing will be advantageous to you on both counts; cashflow now & sale price later.

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi terry you are right!!!
    I work 35 hoours a week and i get all my expenses paid for plus a pretty good wage. After i sell my bussiness im going to focus on investing again.

    Well il keep use guys posted on how we go with selling the shop they say tatts store usualy take up to 6 months to sell.

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871

    HI Johann,

    Good on you for doing some trimming with the expenses. Actual cashflow is one of the biggest challenges for small business, and plenty of skilled business people/tradesmen run into all sorts of trouble as a result of this…..and the fact that many of their customers try and use them as a bank, rather than paying them when they should, and have agreed to. Derek's comments ring true with regard to seeking assistance.
    Good business banks now offer a huge range of free resources for small businesses – none of which was available when I was involved with start up businesses in the past; which would have been so handy.
    THe best information I have found anywhere (which an accountant or business coach would charge (and why not???) you $$ for is on the nab small business website. Everything from starting a business, growing a business, running a business,  and even selling a business. Can I encourage you to check the selling a business bit out at http://www.nab.com.au/wps/wcm/connect/nab/nab/home/business_solutions/11/small+business?WT.mc_id=SBAAA&WT.mc_ev=click
    You will find heaps of calculators and spreadsheets there to that will help, as well as details other places (inc state govt) where you can find other info.
    I'm sure you can appreciate no lender wants to through good money after bad – none of us would in our business either – and that fees & interest are to be expected if we go over an agree contracted loan facility limit. And as you have already seen, it is not in anyone's interest to see a good business 'go under'.
    Check out some of the info on the nab small business site, and I hope all goes well with both your business sale, and your future investing.
    Cheers

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi Guys,

    Maybe Terry you can provide a opinion on this:
    Current Situation: 
    Home Loan: $109,000K = $645.00 per Month in Repayment

    Bussiness Loan – Two Splits Loan
    1) 285K – Intrest Only – $2000.00 Per Month
    2) 275K – P & I – $4000.00 Per Month

    Security: Using My Home Loan – 109K valued at 410k
    Parents Home: Loan 158K valued at 360K

    Could this be done Instead:
    Sell the home where living in: But sell it to another company? for example for 385K
    With the profits pay of the Bussiness Loan of 275K – Save 4k a month in repayments

    Home loan would be 385K but repayments would be less?
    Could this be done??

    Could this be Done:

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    hi Johan

    First thing I notice is that one of the business loans is PI. Changing this to IO will assist reduce the repayments. And IO would be more tax effective as you would want to divert money to your home loan first which is not deductible. PI on a business loan means you end up paying more tax.

    It is also unclear which loans are secured by which properties and you have your parents home in there valued at $360k, but business loans of about $520k so I think you may have cross collateralised your home and your parents home to get these. This is dangerous because you have your parents home on the line and because you have crossed securities. It could have been set up much safer perhaps.

    But yes you could sell. There are 3 problems to this:
    1. You would be selling to a company which you control.
    2. You would still have to make payments
    3. stamp duty.

    If the aim is asset protection then there will be little if any in doing this.
    Your other company would still need a loan of $400,000 or so that buy the house.
    large amount of money wasted in stamp duty and legals, and

    4. You will still have to qualify for a new loan. If you are having problems now then the bank may not lend.
    5. there would also be tax issues to consider.

    What about this:
    – trying to change the PI loan to IO
    – consider putting the business on the market
    – maybe negotiate with your bank to re-extend the terms of the loans. eg. if you have 30 year loans which have been going for 5 years try to restretch it out to 30 years again. but this wouldn't affect IO repayments.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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