Opportunities for brokers to finance start-ups

Last financial year almost 300,000 Australian businesses opened their doors for the first time, spanning industries including construction, transport, postal/warehousing, professional services and real estate^[1].

Yet business success can be elusive. For every two businesses that started-up in the 2020–2021 financial year, only one was still operating in June 2024^[2].

That’s why it’s so important to start on the right foot – and it’s here that brokers have a vital role to play in providing would-be entrepreneurs with know-how, networks and funding.  

The start-up aspiration

For Emily Bremner, ANZ Senior Business Banking Manager in Cairns and surrounds, the desire to start something new is becoming more and more common.

“Brokers are seeing more people who want the flexibility and freedom that self-employment can offer, especially where they see new opportunities or existing business models that could be improved to make them more profitable,” Bremner says.

She adds that starting a business in regional Australia can be particularly attractive.

“Generally, costs in regional areas are lower, there are lots of government grants and a good culture of locals supporting local businesses,” she adds.

Challenges brokers face in supporting start-up businesses

Mandeep Chanana (pictured), Senior Business Banking Manager, ANZ Commercial Bank in north-west Sydney, is also seeing a steady stream of brokers seeking start-up finance for their clients.

“Starting a business can be challenging and rewarding at the same time,” Chanana says.

Below are some of the challenges brokers and their start-up clients face.

• Gaps in business experience

A broker’s start-up client may be enthusiastic but lack business experience.

As Bremner explains, “sometimes people who want to start a business just have a dream – but haven’t considered the other factors that you need to know to run a business.”

“A lot of markets are oversaturated, so it can be difficult to bring a business to life when there is so much competition,” Bremner adds.

And once a business is launched, it will need to stay agile.

“You’ve got to be ready to change. That goes for all businesses but for start-ups, it’s more so,” Chanana notes.

The good news is that the free ANZ Business Hub website makes it easier for brokers to help their start-up clients do the planning they need to do when starting a business. Specifically, ANZ’s business plan templates and business start-up checklist give brokers tools they can use with their clients – giving them the best chance of success.   

• Understanding the importance of cash flow

Furthermore, a business will need working capital in addition to cash to buy equipment, inventory and meet other start-up costs.

“That’s why a cash flow forecast is an important part of a business plan,” Bremner says.

If the business is starting from scratch, the business owner will need to build up a customer base before sales come in – and suppliers may not extend credit. That means it can take months or years to become profitable.

Using ANZ’s cash flow forecast tool, a broker can help clients plan ahead. A cash flow plan can also enable the business to go back after a year and look at what it forecasted it should be making to check it’s on track.

Funding options for start-ups

Both Chanana and Bremner agree that the type of business that’s started can play a significant role in determining how successful it’s likely to be and the funding options available. Franchises are generally more likely to succeed than independent businesses, making them easier to finance.

This is because an established franchise usually has a proven business model, a track record of success and brand recognition.

“ANZ is one of Australia’s largest sources of franchise funding,” Chanana says.

“We have a preferred panel of franchises where we already know the franchise’s profit margins. This streamlines the lending process for the broker and their client, and we can offer a competitive LVR.”

Bremner adds that an approved borrower needs a 35% deposit when starting a business from ANZ’s preferred franchise list. This deposit can be either equity from a property, cash, or a mix of both.

However for a lot of start-ups seeking finance, they begin with a good idea and back it up with a detailed business plan which helps lenders understand the potential of their business idea.

Kathy Polat (pictured, below), ANZ Senior Business Banking Manager, recognised the potential for her client’s business plan.

“My client identified a growing gap in the boutique property management service market, many property owners were looking for more personalised, hands-on support to manage their investments. This inspired them to launch their own boutique property management venture.

“As a start-up, they were passionate about providing a more responsive and integrated experience than traditional agencies. Their services quickly gained traction through a strong network. However, despite early success, they faced typical startup challenges, chief among them was accessing fast and flexible funding to expand their operations.

“They needed a financial solution that wouldn’t burden them with high setup costs or slow approval processes.

“I guided them to ANZ GoBiz, the simple process had everything completed online with no paperwork, which saved them significant time. The speed of the application process was particularly valuable. This allowed them to move forward with their expansion strategy without delay, hire new staff, and enhance their service offering, all while maintaining strong cash flow.”

In contrast, buying an existing independent business or starting one from the ground up requires an approved business owner to have a 50% deposit.

To secure business finance, all business borrowers must also meet ANZ’s four Cs: character, collateral, capacity and conduct.

Some of the choices broker clients have in starting a business:

1. Starting a franchise in a new location. Often the franchisor has researched the local market potential of a new store. If the franchise is on ANZ’s preferred panel, then the funding approval process may be streamlined
2. Taking over the ownership of an existing franchise. The performance of the franchisor, the franchise business and the background of the borrower helps the lender approve the loan – particularly for preferred franchises
3. Taking over the ownership of an existing independent business. The performance of the business and the professional background of the borrower determines the loan assessment
4. Starting an independent business, such as a builder or electrician who wants to work for themselves. The work and management experience of the borrower is an important factor in assessing the loan

Why brokers should support start-ups

Organising finance for business start-ups can be a lucrative market segment for brokers. This is because newer businesses often have a stronger appetite for growth and appreciate the expert, timely assistance their broker provides.

For prospective business owners, the advice and support provided by brokers throughout the process is invaluable. From planning to securing funding, brokers streamline the whole process, negotiate the terms with the lender and reduce any potential risk.

“Brokers also use their network to help would-be business owners find the right team, including an accountant and solicitor,” Chanana explains.  

How brokers can find new business clients

For brokers wanting to expand into new business finance, Bremner recommends having good relationships with accountants who set up new businesses as well as with business brokers who sell businesses.

Chanana also recommends brokers attend seminars and events marketed to new business owners such as the Franchising Expo to network. Establishing good relationships with franchisors who may refer prospective franchisees is also rewarding.

Key takeaway

Brokers play a crucial role in helping aspiring entrepreneurs turn their business visions into reality, offering essential guidance and access to funding. ANZ’s comprehensive resources and support make it easier for brokers to work with start-ups – in turn strengthening a broker’s own business.

How ANZ helps

ANZ has the tools, expertise and appetite to help brokers attract aspiring entrepreneurs and help them thrive. Reach out to a Broker Manager here.

Disclaimer

This is general information. ANZ is not giving advice or recommendations, and we haven’t taken into account your clients’ needs, financial circumstances or objectives. You and your clients should carefully consider which ANZ products are appropriate for them and should seek appropriate independent advice (which may include property, legal, financial, taxation and accounting advice) before making any decisions, investing, or acting on it. Terms and conditions, fees and charges, and credit approval and eligibility criteria apply to ANZ products.

[1] Australian Bureau of Statistics, 8165.0 Counts of Australian Businesses, including Entries and Exits, June 2020 to June 2024, released 17 December 2024

[2] ibid