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Connecting business owners with financial expertise to grow their businesses.
Sarah Petty (00:01)
Nice to have you on the podcast today.
Katherine Looke (00:05)
Thanks so much, I appreciate the opportunity.
Sarah Petty (00:09)
Well, we are talking all about business financing today, which is something a lot of, ⁓ we've got a phone call. I wish this was a dial-in show, but not quite. ⁓ We're talking about business financing, something that a lot of business owners require to keep growing their business. So I'm sure you'll have lots of insights and interesting information for the audience today. I want to start by getting to know a little bit about you.
You're a finance broker with FinWeb and you started investing in property from 21, I hear. So tell us a bit about what you do and how you can now help business owners.
Katherine Looke (00:52)
Yeah, my pleasure. So you're correct. I bought my first investment property when I was 21. ⁓ Never went uni for whatever reason. I just wanted to get straight into the workforce and went and dived into real estate. And I think that also helped encourage me to buy property and give me all the knowledge and support there. ⁓
And so, yeah, pretty much every second year, my husband and I bought another property. So we went hard in my 20s. ⁓ And I went into banking, ⁓ you know, worked my way up from the bottom to be a mortgage specialist and got to see lending from the bank's point of view, their risk appetite, you know, what they look for. And then
finished my time actually in the complaints department during the Royal Commission. Yes, so you could imagine how fun that was. It was kind of a good view to see the struggles of clients when dealing with banks and you know, the common issues. And so that encouraged me to...
Sarah Petty (01:59)
Yeah.
Katherine Looke (02:17)
you know, when I was looking at being self-employed and having options and being able to support people in more of a holistic way, it led me into being a broker. So I love the whole concept of supporting businesses, especially after COVID, you know, it was just so disheartening seeing so many businesses close their storefronts and not be able to survive. ⁓
Sarah Petty (02:42)
Yeah.
Absolutely.
Katherine Looke (02:47)
even with some of the bigger and larger corporations going under. Like this year, think it was ⁓ catch of the day. I had previously bought a lot from them and I'm like, well, if the big businesses are failing, no wonder the little businesses are struggling. And I just found a passion to really support them holistically, whether it's cashflow.
Sarah Petty (03:03)
Yeah.
Katherine Looke (03:15)
business acquisitions because they're growing franchise purchases. ⁓ You know, I kind of found my niche and you know, I've loved it and I don't think I'll ever, yeah, ever go back.
Sarah Petty (03:30)
that's amazing. And I think what I love about that story, know, buying property at 21 is something a lot of people just think is impossible. You know, there's this real mindset that it just can't happen. It's not even no point trying. I think what you've proved there is having the right information and understanding can make such a world of difference. And, you know, I see it in my role as well because
we're really trying to help in the same way you are, support small businesses to grow and thrive and prevent those businesses from failing. There's some sort of failure rate of first year businesses or first three years of about 60 % of businesses end up failing. And often it's just not access to the right expertise and guidance. And so, anything can be done when you understand and you get the right.
Katherine Looke (04:16)
Mm.
Sarah Petty (04:21)
experts to help you along the way. So I love that that shows that anything is possible in this space.
Katherine Looke (04:28)
Exactly. And you know, a lot of the businesses that fail, especially if they're product based, they're actually profitable. They fail because of cashflow and not being able to manage everything properly. So, you know, if, if we support those businesses, you know, even more than the Australian economy is just going to, you know, do so much better and, you know, grow.
Sarah Petty (04:40)
Yes.
Katherine Looke (04:57)
so we can buy things locally more instead of maybe importing.
Sarah Petty (05:00)
Absolutely.
Yeah, for sure. And a very good segue into the question that we have from one of our listeners, Sylvia, who's an e-commerce business owner. So I'll read through the question and then Catherine, I've got a few questions for you to help answer it. So Sylvia asked us, as my business grows, I need financing to invest in inventory and upgrade our technology. What are the best options available to fund this type of growth?
Now, of course, Catherine and I are giving very general advice today. And if Sylvia or anyone else wants specific advice to their situation, they should engage a broker or other financial advisor to help them with that. But we'll try and give some advice on how to approach it and just what to think about for this type of business. So this sounds like it is a product based business if she's talking about inventory.
And often I find business owners, they think that the traditional bank loan is kind of the only way to go. And if that's rejected by the bank, then there's no other options. But Catherine, in your experience, what financing options are available for small businesses beyond that traditional bank loan?
Katherine Looke (06:14)
Yeah there is actually so many options ⁓ and like you said a lot are so unknown. ⁓ You know you've got the obvious ones such as overdrafts, line of credit, short and long-term loans but then you've also got invoice financing, asset financing where like it's a lease, equity loans, trade finance. ⁓
there's so many options and it all depends on the business. So for Sylvia, ⁓ you know, we would look at what's the urgency? Is interest rate important? What's their credit score? How long do they think it'll take to repay the debt or do they want it ongoing? So, you know, for the next ⁓ round of growth that she might have, ⁓ how much is
Can it be secured, unsecured? ⁓ You know, all those things impact the working capital finance option. And when we find out all of those things and the background to the business, then we can more easily choose which of the finance options would best suit her. ⁓
I suppose for Sylvia with inventory and technology, a lot of businesses usually go with an overdraft or a line of credit facility. You know, they can be secured so you'll have a better interest rate, you know, it can be between seven and 10 percent, whereas unsecured is higher than that and you're only charged on the amount that you use. you know, they're a lot, they're very common. ⁓
forms of lending for businesses when they're looking for inventory and working capital. So, you know, that could potentially be an option for Sylvia, depending on what the answer for all those other, you know, important points are.
Sarah Petty (08:19)
Yeah. And I think just to help business owners who don't have experience in this space. So what you're talking about with the overdraft or some sort of line of credit is where you have ongoing access to that money. You can use payback, use payback over time versus a loan, which is sort of a fixed period of time that you need to pay it back. Is that correct?
Katherine Looke (08:38)
Yeah,
correct and overdrafts are usually for businesses that they're going to ebb and flow within in and out of debt. Whereas a line of credit is usually for you know larger amounts they need you know the full amount they'll pay it off but they still want access to it for future. ⁓ Whereas a loan is set
and you know you can have one to three years ⁓ for you know private lenders or potentially longer ⁓ with better interest rates as well if it's secured so overdrafts and liner credit are good when it comes to working capital because you'll take what you need pay it back and you potentially still have access to it moving forward.
Sarah Petty (09:29)
Yeah, yeah. And I just want to touch on the secured versus unsecured there and why you were talking to the different interest rates. So I guess that's from the lender's perspective that a secure loan is less risky for them than unsecured. And can you just talk to what are the examples that you could use as security? Does it need to be within the business? Is it the owner's personal assets? What type of things can be put up for security?
Katherine Looke (09:55)
Yeah, so security can be property, can be if you own the office, the factory, ⁓ you can use for security the equity within the business or you know such as for ⁓ invoicing financing, you know the lender is chasing
your customers for payment. They have you know that debt and then you'll only get the difference once it's paid. ⁓ You know there's ⁓ you can do the entire business trading so all of the assets that you have a lot of businesses will have a lot of inventory just sitting there ⁓ because the days to actually being able to sell it and turn it into cash.
is growing or it could be more than just 30 days. And so the banks can use that for security as well. ⁓ If you've got something and it's worth something, the bank will look at it to secure the loan and give you a better interest rate because they know that if worst case happens, they've got an idea of what they can take to sell to repay the debt. ⁓ And then with unsecured,
Sarah Petty (10:46)
Yeah.
Katherine Looke (11:12)
It's faster lending usually. So you know, you can get lending with private lenders for unsecured debt within 48 hours. Whereas secured debt can take some time depending if you go with one of the big banks. ⁓ You know, and that doesn't always suit people, but you can always do it as, you know, a solution. You know, you need the funds immediately. So we'll go with unsecured fast debt.
And then once you've got your finances, we can then refinance it with a different lender to get you that credit interest rate.
Sarah Petty (11:49)
Yeah, makes sense, thank you. And how does working with a broker add value compared to just going directly to your bank or to a specific lender?
Katherine Looke (11:59)
Yeah, so I kind of look at it similarly to residential lending. So with residential lending, brokers have a set of guidelines that they have to abide by. They have best interest duties to clients. And if you use a good broker, they'll be using best interest duty with their business clients as well, even though it's unregulated. When you go with a lender,
they don't have best interest duty. They only care about the products they have, their risk appetite and getting the best deal for themselves. ⁓ So when you use a broker, they're looking at a wide scope of lenders, options, know, they're problem solving and thinking for out of the box solutions for what you need to either get your better interest rate,
Get the funding faster, look at more products. ⁓ know, multiple lenders, they all have different products, different risk appetite, and that could be the difference between getting approved for a loan or being declined. And when you're going to the lenders, if you're shopping around just by yourself, you're getting all these inquiries on your credit report.
And that can eventually negatively impact your ability to get lending. If you're shopping around too much, whereas a broker's there, they do that at the get go. And then they look at the best options, provide the recommendations to the client with their reasoning, and then you go through that process. So you're saving yourself inquiries, you're saving yourself time. ⁓
You know, you don't have to sit on the phone for an hour trying to get through to the bank because the broker's got the relationship with the BDMs to workshop the deals, get better pricing and make it a ⁓ nicer process and a more positive experience for the client than if they went direct to the bank.
Sarah Petty (14:07)
Yeah, for sure. And I guess you're really understanding all aspects of the business. As you say, just going to the bank, they only have their suite of products to offer you. But a broker is looking more broadly and especially if you've got a situation that's a bit out of the ordinary. ⁓
Katherine Looke (14:16)
Mm.
Sarah Petty (14:23)
I guess that's where a broker could really help out to show you the different types of options because what you mentioned at the start there, there's more than just a simple overdraft or a loan. There's so many ways that you can look at financing and you might think it's a business loan that will work, but there might be a better, more cost effective or better option for you that a broker will have access to and be able to give you that advice.
Katherine Looke (14:47)
Yeah
exactly and when you work with a broker you have one point of contact when you go direct to the bank you know they have staff getting promoted changing you know departments leaving so you know you're gonna have to yeah and the last thing you want to have to do is repeat yourself every time that you need lending
Sarah Petty (14:55)
Yeah.
being made redundant. Yeah.
Yes.
Katherine Looke (15:16)
to a new
Sarah Petty (15:16)
Yeah.
Katherine Looke (15:17)
person who may not have experience in your industry and they could then decline you because they just don't know your business. Whereas you've shared all that with the broker and they're through the whole process and after the process and so it's the hellistically supporting you through your business journey.
Sarah Petty (15:22)
Yeah.
Yes, exactly. So to help business owners who may be looking for financing, what do lenders typically look for when assessing whether to approve financing and how can business owners prepare themselves for that?
Katherine Looke (15:56)
Yeah so it really does depend on the kind of financing you need. You know there are no-doc, low-doc options which means that if you've all of a sudden fallen into a situation when you need immediate funding there are lenders that we can go to with just an accountant's letter or you know linking to your bank feed of
for like your zero or my of account. ⁓ But otherwise, if you're wanting a really good interest rate and you're preparing yourself and you've got the time there, always working with your CFO, your accountant, bookkeeper, making sure everything is up to date. There's so many situations where business owners just don't know their business finances.
They, you know, haven't looked into their debtors, their creditors, how long it takes for them to sell inventory, or they haven't done their bass. They haven't paid super for their employees sometimes, which is a big red flag. Having that time to get your finances in order, so you potentially have your tax returns.
your ATO financials, your BAS statements, ⁓ you know, you've got a profit and loss, you know, your cashflow report, you've got a business plan. Sometimes the make or break for a loan is you just being able to articulate and show the lender what you're doing with the funds. You know, do you have a plan for the funds? It's just like, okay, like you want the funds, but
Sarah Petty (17:44)
Yeah.
Katherine Looke (17:50)
What are you going to do with them? How are you going to use that to make profit to then pay back the debt? And that's probably the biggest thing that people don't even consider. They're like, I need funds. It's like, okay, well, give us the background. Tell me the story, show me the figures. ⁓ What's your working capital like?
Sarah Petty (17:52)
Yes.
Katherine Looke (18:20)
all those things, making sure that you've prepared yourself so you've got the best chance for the best interest rate and it doesn't take forever because you know we're not continuously going backwards and forwards with the lenders because you know we're still waiting for you to you know get your taxes done or your bass done or you know all those sorts of
Sarah Petty (18:41)
Yes.
Yes, absolutely. And you know, it's something ⁓ we talk to clients about a bit as well. We're not finance brokers, we have you and we would work with people like you or introduce them to our clients when they're looking for financing. You're right in that in some situations, it does come to the point where you just need the financing and you need it quick and maybe your business isn't in the best position, but you need that financing to help get you out of that.
Katherine Looke (18:51)
Hmm.
Sarah Petty (19:10)
and that's sort of one scenario. But in an ideal world, if you are forecasting, it all comes back to planning and forecasting, and you're understanding how your business is performing, you know when you may be coming up to a cashflow crunch, or you're looking to invest in growth, and knowing sort of that timing in advance can help you prepare for this. And as you mentioned, Catherine, getting the best rate ⁓ and getting the best.
Katherine Looke (19:10)
See.
Sarah Petty (19:35)
option for your particular business. So it is really important to be thinking about financing in advance in an ideal world and not just in the situation when you're needing to put out the fires.
Katherine Looke (19:43)
Yeah.
Yeah, well, you know, you don't want to have to be in that situation where you're putting out the fires, you know, if you're constantly, you know, looking at your figures and your numbers, you can preempt situations and be like, ⁓ okay, well, you know, I've got 3060 days for, you know, this invoice to be paid, but
Sarah Petty (19:55)
Yeah.
Katherine Looke (20:12)
All of my, like the business invoices have to be paid a lot sooner. So there's going to be 30 days of shortfall for cashflow. So, okay, well we can prepare for that instead of getting to it and then having to go with a more expensive option to get you out of that hole.
Sarah Petty (20:20)
Yeah.
Yeah, 100%. So with that, what are some of the biggest mistakes that you've seen business owners make when they're seeking finance?
Katherine Looke (20:40)
So I think the biggest mistakes would just be not managing their finances. Some smaller businesses can sometimes just get away with it if they're service-based. They're just like, yeah, I've got the profit. Don't spend more than what I'm making. Just do it, do it in real sense. But when it comes to having stock on hand in your...
Sarah Petty (20:55)
Yeah.
Katherine Looke (21:05)
you know, then have employees and you've got to pay for technology and growth and you know, leasing a space, all these things start to occur in the background that you've got to be aware of. You can't just be signing signing up your life away and hoping for the best. ⁓ You know, the worst thing is clients coming to me and they can't show me or tell me how they're going to make that profit.
with the funds to pay back the lenders. You know, they haven't done their financials. All we can see is they're bleeding money. And it's like, okay, so you need more money. So you don't have to go into liquidation. ⁓ Well, if we give you that money, what's going to stop you from continuing to bleed money? You know, it's you've got to think about getting your business into a state where there's a plan.
Sarah Petty (21:55)
Yeah.
Katherine Looke (22:01)
to manage paying out all your debt to then making a profit, which is what the bank needs to see. And if they can only see that you're bleeding money, well then you've waited too long to get support there. Even with the private lenders, they will still want to look at potentially 12 months of bank statements at a minimum. But if you're not making profit on
any of those bank statements then they're not even going to provide you lending even if they're happy to consider a really bad credit score or not even look at a credit score. know there's have thinking about it and not waiting until you've drowned to try to get financing to save you. ⁓ You know I've dealt with businesses that you know the one business has failed.
Sarah Petty (22:48)
Yeah.
Katherine Looke (23:00)
And so then they're liquidating it or closing the business down and then starting a new one. And it's just like, what's changed with you as a business between the two businesses? Why is this one now going to be profitable? And that, and that one wasn't that you've had to close it down. ⁓ you know, it's the support you need. You need support in a business if you're wanting to grow. ⁓
Sarah Petty (23:09)
Yeah.
Yes.
Katherine Looke (23:28)
you because once you get to a certain level, you can't just be across everything. That's why businesses get HR departments, get a virtual CFO to manage their books, have an accounting team. You know, the, as a business owner can't be across it all. Otherwise you're going to be working 24 seven, seven days a week and still, you know.
Sarah Petty (23:50)
Absolutely. Yeah.
Well, as they say, when you start doing that, you don't have a business, you just have a job. ⁓ You know, it's not, it's not the freedom of business that you're looking for. ⁓ But it's some really good points there. And I think, you know, in my experience, the mistake that you're talking about is a lot of business owners sometimes see financing as free money. They've suddenly got this injection of cash, but then don't have the plan to actually repay it. And you're right that if
Katherine Looke (23:57)
Yep.
Yeah.
Sarah Petty (24:18)
You know, you've got to that situation and cashflow has been tough to manage. What's going to change because you have to repay the debt. can't, it's not free money sitting there that you can pay as you like. You have to have a plan in place to be able to do that. So in any of these situations, have you ever advised a client not to take on finance?
Katherine Looke (24:42)
Yeah, and I think that is what makes a good broker. You can get a lot of angry clients because all they see is I need this money, I need this financing, help me. But providing the lending can, in a lot of instances, be the worst thing for them because, yeah, okay, you want $50,000 to get you out of this hole.
Sarah Petty (24:55)
Yep. Yep.
Katherine Looke (25:08)
But what about all the interest that that 50,000 is generating? You've got to be able to make more money than what the 50 grand was given to you to be able to get yourself out of that hole. And if that's not feasible, then you're putting your client in a worse situation. Even if some of the private lenders will entertain the idea, doesn't mean that it's the right
Sarah Petty (25:12)
Yeah.
Katherine Looke (25:37)
solution you know it might be okay yeah we can look at it but first you've got to work with an accountant or a CFO to get these in place to make it realistic for you otherwise you know you're just going to be putting yourself in you know more debt that you have no idea how to pay back you know
Sarah Petty (26:02)
Yeah.
Katherine Looke (26:04)
Like I mentioned with the liquidating, there was a business that came to me for funding and he was like 85 and he was liquidating one business. had debt. It had super debt. He hadn't paid his employees and he had another entity that he wanted to take on the other entity's debt.
And I'm just like, but that's not profitable like your other business. And I'm like, we need you to pay your ATO, your super and your over debt from the other entity. But your other business isn't doing enough profit to be able to cover that. you know, you kind of, plus your 85, you know, if we give you debt, how much longer are you going to stay in business for? You know, maybe you should be winding down or, you know, with the new entity.
Sarah Petty (26:33)
Yeah. Yeah.
Yeah.
Yeah.
Katherine Looke (27:00)
getting in a position that you can sell the business to be able to make profit, to sell the outstanding debt that the other entity had when, like, as you're liquidating it. So, you know, it's situations like that, that, you know, you've got to have the hard conversation with them and it's not what they want to hear, but, you know, I don't want to be taken to court because I got you lending that was...
the wrong thing to do and you're in a worse situation now you're trying to sue me. So it's, you know, myself just as much as protecting the client at the end of the day.
Sarah Petty (27:35)
Yeah, yeah.
Yeah, absolutely.
You know, there's an ethical side to this, right? It's not just about giving more money and getting someone else into a worse situation. ⁓ You've got to be thinking about the clients, is it going to make the business and the client themselves better off in the long run or not? And sometimes, you know, it's having to have those tough conversations, but thinking about the best outcome for them, right? ⁓ It's not.
Katherine Looke (28:06)
Mm.
Sarah Petty (28:07)
as you say, you don't want them getting into a worse situation and spiraling. But I think it all comes back to again, just planning, getting the right expertise. And at that point, you know, maybe it's not looking at financing, but it is looking at some of the core business structure or underlying issues in the business model to get yourself a bit back on track and a plan to be able to pay down debt before you relook at financing again. I always believe that there's an option.
Katherine Looke (28:27)
you
Sarah Petty (28:35)
to move forward, it's just getting access to the right help to get you through that.
Katherine Looke (28:42)
Yeah, you know, even just the simple thing that if you've got 60 days payment turn, ⁓ just reducing it to 30 days could potentially help your cash flow getting paid sooner and then stretching out, you know, your debt, you know, really, I've got 30 days, let me see if I can get 60 or 90 days instead. So turning the tables so you can hold on to your cash and get paid faster could be, you know,
Sarah Petty (28:52)
Yeah.
Katherine Looke (29:11)
the one thing that you no longer need lending, was just that that you needed to change.
Sarah Petty (29:19)
Yeah, good tip. And I've even seen it where they have got quite favorable terms with their customers, but they've got a huge overdue debtors balance and are not chasing it up. So if money is owed to you, follow it up, chase it or, you know, invoicing that they haven't done that was, you know, due to cut clients months ago. So simple things like that can sometimes make a big difference.
Katherine Looke (29:30)
in
Sarah Petty (29:42)
Well, Catherine, we're about out of time, but thank you. I feel like we could keep talking on this. There's lots of questions. But I think you've covered quite a lot today and hopefully given Sylvia a few things to think about for her question as well as many of the listeners. If people are interested in learning more about your working with you, where can they find you?
Katherine Looke (29:42)
Yeah.
Thank
Yeah so I'm pretty much on all socials ⁓ so you can either just reach out to me via email which is katherine at finnweb.com.au or my mobile 0451 254 138 otherwise if you just type my name into google everything will pop up and yeah you can reach out to me.
Sarah Petty (30:29)
Great.
Okay, and we'll put some of those links in the show notes so people can find you easily. Great, well, it was a pleasure having you on today and really appreciate sharing all of your insights and information.
Katherine Looke (30:44)
Thank you. I loved it. I appreciate you having me on.