Cashflow key to funding investment

You should determine how much you can afford to invest and the ongoing cashflow needed to support the business plus any purchase or set‑up costs. The article stresses checking whether your income covers living expenses and loan repayments and whether the new venture will be cashflow positive — many small businesses are not initially and may need extra capital from owners.

Yes — in the article Michael could release $18,500 per year by converting his investment property loan to interest‑only, which could be used to repay additional borrowings. Any change like this should be considered carefully and tested against your own loan details and repayment capacity.

Not automatically. The example shows that even if income covers current outgoings, there may be no significant spare cash for new loans unless you restructure existing debt (for example, move to interest‑only) or sell assets. You may instead need to borrow against assets or sell investments to raise capital.

Michael’s net assets (excluding his home and superannuation) were just over $1 million. To fund a business he would either need to sell investments or borrow further against his assets, with the scale of re‑arrangement depending on the capital required for the venture.

Selling existing investments or increasing borrowing can raise your investment risk and reduce diversification. The article cautions that small‑business ventures have a high failure rate, so funding them by selling varied assets or taking on more debt can concentrate risk.

Because many business ventures are not cashflow positive at the start, you may need to provide extra capital from your own resources. Reviewing projected inflows and outflows helps you understand how much additional funding you might need and whether you can sustain loan repayments.

The article suggests two main options used in Michael’s case: sell some existing investments to raise capital, or borrow further amounts secured against your assets. Which option is appropriate depends on the purchase price, your cashflow, and the impact on your overall investment diversification and risk.

The commentary was provided by Suzanne Haddan, Director of BFG Financial Services, who highlights the need to assess affordability, cashflow requirements and the risks of funding small‑business investments.