A lot of small business owners don’t come to me with a finance problem or a tax problem. What they actually have is a disconnect between the two.
In this episode of the Victorian Small Business Network Podcast, I’m joined by Felicity Belmont from Tax Espresso to talk about something we both see regularly: business owners getting advice from different professionals, but nobody is looking at how those decisions fit together.
Your accountant might be helping you with tax and your business structure. Your mortgage broker is looking at your lending and borrowing capacity. Your financial planner may be helping with your broader financial strategy.
Each person has a different role, but the decisions made in one area can have consequences in another.
That’s why communication between your advisers matters.
What We Talk About
Why tax and finance shouldn’t be looked at in isolation
We talk about what can happen when your accountant, mortgage broker and other advisers are each working with only one part of the picture, and why involving the right people earlier can help you make more informed decisions.
Sole trader, company or trust?
Felicity explains some of the reasons a business owner might start thinking about changing their business structure and why tax shouldn’t necessarily be the only consideration.
From a lending perspective, I explain why changing your business structure can also change the way a lender assesses your income and business history. It’s an important conversation to have before making the change, particularly if borrowing is part of your plans.
Using equity in your home for business purposes
We discuss what to think about when you’re considering accessing equity from your home to put into your business, including why the purpose and structure of the lending matter.
This is one of those situations where your accountant and mortgage broker really do need to be part of the same conversation.
Why separate business and personal bank accounts matter
Keeping business and personal money separate isn’t just about making life easier at tax time.
Clear business banking can also make it much easier to understand what is actually happening with your cash flow and, in some lending situations, provide lenders with a clearer picture of how your business is performing.
Profitability, cash flow and borrowing aren’t the same thing
A business can be busy without necessarily having strong cash flow, and the numbers used for tax purposes don’t always tell the whole story when it comes to lending.
We look at some of the different ways lenders may assess self-employed borrowers and why understanding your options before you need the money can make such a difference.
Why EOFY planning needs to start before June
If you’re considering purchasing equipment, restructuring debt or making other significant financial decisions before the end of the financial year, leaving those conversations until the last few days of June can make things unnecessarily difficult.
Starting the conversation earlier gives your accountant time to provide the appropriate tax advice and gives your broker time to investigate the finance options available to you.
Key Takeaways
Your tax, lending and broader financial decisions don’t exist in separate boxes.
A decision that makes sense from a tax perspective may have lending implications. A lending decision may have tax considerations. And a business structure that worked when you started your business may not necessarily be the right structure as the business grows.
That doesn’t mean one adviser should try to do everybody else’s job. It means the right advisers need to talk to each other.
When your accountant, mortgage broker and other advisers understand what you’re trying to achieve, each person can give advice within their own area of expertise while understanding the bigger picture.
Ready to Get Your Financial Team Working Together?
If you’re making plans for your business and wondering how those plans might affect your lending, I’d love to be part of the conversation alongside your accountant and other advisers.
Bringing everyone into the conversation earlier can help you understand the lending implications before decisions are made and make sure the finance side of your plans isn’t being considered as an afterthought.
Chapters
00:00 Welcome to the Victorian Small Business Network Podcast
01:43 Why tax often feels stressful for business owners
04:06 When to move from sole trader to company structure
06:33 How business structure can affect borrowing power
10:13 Why your accountant and mortgage broker should talk
13:08 Loan structure and tax deductibility explained
18:31 Why proactive accounting matters
20:43 Why separating business and personal accounts is critical
24:06 The three key advisors every business owner needs
30:02 Profitability vs cash flow
33:03 Business lending options and using property security
36:56 Reviewing business loans and saving money
39:40 End-of-financial-year planning tips
44:31 Final thoughts and how to get in touch
Resources & Links Mentioned
- Read our guide: If I Restructure My Business, Will Lenders View Me Differently?
- Learn more about self-employed lending: Alt-Doc & Investment Solutions
- Explore business capital options: Small Business Cash Flow & Equipment Finance
- Connect with Felicity Belmont: Tax Espresso