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How the accountants should advise the SMEs in providing loan

How the accountants should advise the SMEs in providing loan

The spread of the Coronavirus has impacted the world so much that a large number of small and medium scale industries are under a state of pressure because they are on the lowest state of cash flow in history.

This situation can’t be eradicated so easily as the businesses across Australia are not completely aware if the plans that the government has made available for assisting the businesses across the country.

The Certified Practicing Accountant (CPA) in Australia has helped and still helping in a lot of such troubles. To make such a large group of people aware of this situation more and more people are needed by the government having completed at least an accounting internship. Then only they will be able to transfer the authentic information in simple words. They are removing all the obstacles that an employer would face. CPA has worked very effectively in making the business owners aware of the way to get funds from JobKeeper if the business is eligible for that.

As per the statement of CPA, the banks of Australia have played a major role in making the SMEs aware of this situation. Having a large number of people with accounting training in an organization is necessary for coping with such situations. A large number of SMEs have cleared their doubts regarding bank loans with the help of banks. But if you take a look at this situation broadly, it has been found that there is a large number of people who are not getting any help from anywhere. The simple reason behind it is they don’t know where to go for the help that they are seeking.

As per Ana Marinkovic from National Australian Bank, this situation has become so challenging only because most of the businessmen are reducing their expenses and they are also trying shift to the online platforms for sales. After we get the virus under control, there are some doubts about the way consumers start spending their money. It is uncertain how much time it would take for the common people to get back to their old habits of spending money.

“In the later phase when we all will get rid of this virus there are major roles that accountants will play in reshaping the business of our country (especially the small and medium-sized businesses)” said Joe Formichella (Head of Small Businesses at Bendigo Bank).

According to Joe Formichella, most of the problems of the businesses that have been affected so far can be resolved if the business owners consult the concerned accountants very early. It will give the business owners enough time to think and know about how much money they are going to get and where to go for the fund. Other things like the time required to repay that money and other things can also be made clear very easily. The demand of the time at present is to fund the small business owners until the time when the situation becomes normal.

The National Australian Bank has launched a new program called the Small Business Hub. It will primarily focus on supporting the small and middle-sized businesses that have been affected by this pandemic. It will help in the process of digitizing, and making the businesses able to sustain the loss that they have suffered so far. No matter which kind of business you have, if you have someone who has completed even a basic accounting internship program, you can easily project the situation of your business for the upcoming 6-7 months. And that would solve a lot of your problems.

The Basis for providing financial support:

There are some factors that decide whether the lender would fund some business or not. At first place, the lender needs to know about the history of that business. The cash flow statements, balance sheets, profit and loss statements like things tell a lot about the potential of the business.

Based on this information, the lender will know about the ability of the customer and the expected time that the customer would take to repay the amount. These are the foremost essentials that matter the most for providing loans to someone.

After analyzing all these things, the lenders will see the complete forecast/projection of the business for the upcoming 12 months.

After gathering all the information mentioned above, people at the banks try to figure out whether the business owners have a genuine reason to get support or not.

Threatening situation of cash flow in the future:

According to Formichella, there are about 30% of owners of SME who are preferring not to pay their loans in the upcoming 6 months. This is only because nobody wants to take any risk and the situation that they are in has not been caused by them.

Most of such people are in a state of panic as they are seeing that most of the schemes run by the government will last till the end of September.

After we get through all these situations, there is a fear of whether the small and middle scale industries will meet the requirements of cash flow in the future.

Conclusion:

If you are having difficulties in finding a good source of information regarding these matters, Accounts NextGen is the perfect spot for you. We are in this business for a long time to provide you authentic information about finance.

5 Top Tips For a First Home Buyer

Will you believe us if we tell you that it’s completely possible to own your dream home just few years into your work life? Well, if this looks like a distant dream, a dream nonetheless, let us bring you closer to it. Let us apprise you of the possibilities and how we can make that dream a reality for you.

You would definitely want to read through these quickers, the top tips that we have collated for a first-time home buyer like you to help you understand what you are aiming for.

Research, research and more research

We just cannot emphasize enough on this point. Starting with assessing your own credit worth, eligibility, to the property you want to own, the neighborhood, the community, things like work to home commute, amenities, types of loans available, kinds of interests that you can opt for etc.

This list can be endless and quite overwhelming, especially for first-timer. But reach out for help, connect with the consultants or brokers who can hand-hold you through the entire process and get you the deal you want.

The deposit amount

It is advisable to save as much as you can in your initial work years because then you’ll be able to make the deposit figure from your end to the maximum. You should be aiming to meet at least 20% of the total property amount as deposit, so you can get 80% as the loan. If your deposit amount is less than the said 20%, you’ll have to take a Lender’s Mortgage Insurance (LMI) which is an insurance for your bank should you default in the payment.

The First Home Owners Grant (FHOG) and concessions

As the name suggests, this grant encourages the fence-sitters to take the first step and become the first home owners. The grant varies from state to state, and for the state of Victoria, the grant is $10,000. But if your home is in regional Victoria, you are eligible for the FHOG of $20,000.

The first home owner is also eligible for an exemption in the stamp duty payment. This amount too varies state to state, and Victoria offers a $10,000 grant and transfer fee concessions.

The First Home Owners Grant eligibility criteria

The criteria may vary state to state but overall in general, you need to be falling into these to be able to apply for the relevant grant and concessions.

  • The applicant must be a real person and not a legal entity, such as a company or a trust.
  • At least one applicant should hold a permanent visa or be an Australian or New Zealand citizen.
  • Each applicant must be at least 18 years of age.
  • The total value of the property must be below the cap amount. Each state has different property value cap amounts so it’s essential you check this.
  • This must be the first time that you and/or your spouse/de facto will receive a grant under the FHOG Act 2000 in any state or territory.
  • At least one occupant will occupy the home continuously for at least 6 months, commencing within 12 months of settlement or construction of the home.
  • All applicants (including spouses) must not have owned a residential property in any state or territory before 1 July 2000.

The other costs

Keep in mind that the costs don’t just mean the property value. You’ll have to factor in about 3-5% of the property value for extra costs like fees, charges etc without getting a brunt for it later.

You may also like to read more about this in our post on 5 top things to know before taking a home loan.

Do drop us a mail or call us if you wish to understand this in depth. We would be happy to help you unlock your new, first home!

5 top things to know before take a home loan

So, after that coveted college degree followed by years of putting in hard work at your dream job, you are finally at one of the most important decisions of your life – to buy your first house. Now, that does mean taking up a home/residential loan, assuming we all can’t be saving 100% of the loan amount for our first home, right? Don’t let the marketing jargon bog you down while you go looking for the best home loan for your dream home.

We have decoded and collated a quick good-to-know list for first home buyers and even for property investors, to help you settle for the best choice.

1. Save for your deposit
The math is simple. The more you save, the less you borrow. Ideally, you need to save at least 20% of the purchase price. So if you end up borrowing more than 80% of the purchase price, you need to pay Lender’s Mortgage Insurance (LMI). LMI is to cover the lender in case you default on the payment.

2. First Home Owner Grant scheme
Even though it is extremely challenging to get this grant with strict eligibility criteria, but if as a first home owner, you meet all those checklist, you may get one. However, the size of the grant varies state to state. Do check out for your state home loans guidelines for that.

3. Interest rate – Now, interest rate has several interesting aspects to it.
A) For an investor buyer – Interest rates may be higher if the lender knows you are not looking to stay there.
B) Fixed and Variable interest rates – While a fixed rate of interest will give you a sense of how much exactly you have to dispense with month-on-month, a variable interest rate gives you the benefit of lowered payments in case interest rates fall. Both have pros and cons, you need to weigh in everything before you opt for either of the two.
C) Split rate – Alternatively, you can also decide a part of your loan at a fixed rate of interest and the rest at variable. This gives you the best of both, obviously with disadvantages for either of the case.
D) Repayment – You can opt for weekly, fortnightly and monthly payouts of the mortgage. Do keep in mind that banks or lenders calculate interest on a daily basis. So opt for the payout that you don’t end up paying more over the term of the loan.

4. Frills and Features
Any additional feature that is being offered in the bouquet may also cost more in terms of extra fees or payments. That being said, most loans offer a variety of features that you can use to your benefit.
A) Additional repayment – You can pay any additional amount you may have got (hello, family inheritance or a lottery!) towards setting off your loan figure.
B) Refinancing – Home loan market is extremely competitive so expect variations in interest rates, different features being offered etc. You can opt to switch your mortgage to another lender or to some other product with the same lender. Just stay updated with the interest rates.
C) Offset account – A transaction account attached to your loan account, the balance of which you can use to set off the outstanding loan amount.

5. Fees and duty
Be very mindful and provide for all the fees, charges and stamp duty that may come up while on your way to the home loan.
A) Stamp duty – As a first time home owner, your stamp duty may stand to be exempted.
B)Lenders Mortgage Insurance (LMI) – Like discussed in the first point, you have to factor in this cost in case you have saved less than 20% of the loan amount.
Most of the one-off fees and costs can also be negotiated upon with the lender, considering the highly competitive nature of the mortgage market. Make sure you bargain hard!

We hope this list gave you enough roadmap on taking that mortgage for your first home. Hit us up in case you have any doubts or queries. We’ll be happy to resolve those for you.

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