Is it hard to borrow money from the banks?

I’ve heard from many people that it’s very hard to borrow money from the banks. Should I skip doing the rounds of the banks and just head straight for an investor?


Generally, major banks do not lend to early stage businesses.


Except for small loans from the micro-finance units at some banks (e.g. NAB), most banks want to see at least a year of trading before they lend.


To borrow a quote from Robert Frost, “a bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain”.


Personal finance remains the most common source of finance for start-ups. This includes credit card debt and redraws against a household mortgage.


If you need finance, I would suggest that you phase your capital requirements in this order:

  • Personal finance: Use your own funds, including mortgage redraws and credit cards, to establish your business (entity, business plan, basic web site).
  • Micro-finance: Have a quick review of what micro-finance options might be available.
  • Grants: Check if there any State or Federal Government grants for your particular industry sector.
  • Investors: By now you should have a working prototype of the business, with some commercial traction. At this point, you’re ready to “pitch” to family, friends and other potential investors.

The key is to be fast, clear and focused in your start-up phase.


Don’t waste time with banks (or anyone else) who will slow you down.


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