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Business loan vs business credit card

Posted on March 18, 2020 by admin

Business loans and business credit cards are the most popular financing options, but there are key differences between the two that you should consider to help you make the right choice for your business.

Business loan
A business loan is a lump sum of money that you borrow. They can be a good option for your business if you require funding for a larger one-off purchase, such as buying new equipment or machinery, real estate, business acquisition, capital investment or refinancing existing debts.

Business loans typically range from $5,000 to $50,000 and can be paid as a lump sum or through multiple set payments. Depending on your bank, you can generally make repayments in monthly or quarterly instalments that are tailored to you and your cash flow.

To get your business loan approved, there is usually a strict approval process you must pass, which can include details such as your business’s financial position and a financial spending plan.

In terms of extra costs, a business loan generally comes with signup fees and late repayment fees. The interest rate for a loan is often lower than a credit card and can be a monthly or annual rate, which typically ranges between 3-10% p.a for secured loans.

Business credit card:
A business credit card is a suitable option if you want funds for short-term needs. Business credit cards are also generally more flexible than a business loan. They usually allow for a limit of up to $50,000 and are often used for working capital, emergency money and smaller ongoing expenses.

In terms of fees, business credit cards typically have a higher interest rate than personal credit cards, however, you only need to pay interest on each month’s expenses. The interest rates are higher than a business loan and can vary between 10-20% p.a. Fees such as annual fees and late repayment fees will apply to business credit cards.

A business credit card also comes with bonus features, such as bonus points for spending, free deliveries, frequent flyer points, complimentary insurance and a reputable company credit score with good use.

Business credit cards can be beneficial in the sense that it offers flexible funding and continuously available money, however business owners should be confident that they will be able to manage the minimum monthly repayments to avoid overdue fees.

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BAS lodging and government funding eligibility

Posted on April 2, 2020 by admin

As part of the second $66 billion support package in response to COVID-19 and its negative effects on the Australian economy, the Federal Government has expanded tax-free cash payments to small and medium businesses with a minimum payment of $20,000 and maximum of $100,000, up from the previous $2000 to $25,000 range.

However, it is important to note that payments are only given to eligible businesses after they lodge their BAS (business activity statements) by the 28 July and 28 October 2020 due dates.

The new enhanced scheme will be delivered in two phases:

  1. Employers are set to receive a first payment equal to 100% of their salary and wages withheld (a maximum of $50,000) when lodging their activity statements at quarterly due dates.
  2. An additional payment equal to the first payment made after businesses lodge their BAS by 28 July and 28 October 2020.

Businesses will receive payments based on their BAS lodgement schedules. For example, a business that receives a payment for the period up until June 2020 will receive the same amount for the period up until September 2020 upon the lodgement of their BAS in two separate occasions.

For monthly BAS lodgers, businesses will receive their first payment for the March 2020, April 2020, May 2020 and June 2020 lodgements, with a 300% calculation in the March activity statement to provide the same treatment as quarterly lodgers. Similarly, the second payment businesses which lodge their BAS monthly will be released once they lodge their June 2020, July 2020, August 2020 and September 2020 lodgements.

To remain eligible to receive the new government funding for small to medium-sized businesses, remember to lodge your BAS on time as per your usual schedule. There are several options you can consider to lodge your BAS:

  1. Lodge online through your myGov Business Portal
  2. Lodge through your tax or BAS agent (who can access your myGov)
  3. Lodge as “Nil BAS” if you have nothing report for the period online or through phone
  4. Lodge by mail
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