Responsible Lending and Entrepreneurship Insights

Responsible Lenders

• Responsible lenders must make reasonable inquiries regarding a borrower's financial situation.
• Responsible lenders must verify the borrower's financial situation.
• Lenders assess the suitability of credit contracts based on the above inquiries and verifications.

The Banking Royal Commission

• Deregulation of banks in Australia started in 1973.
• The Australian Prudential Regulation Authority (APRA) oversees Authorised Deposit-Taking Institutions (ADIs) like banks.
• ADIs are authorized by the Banking Act 1959 to take deposits from customers.
• ADIs pool deposits to provide loans and mortgages to individuals and businesses.

Being an Entrepreneur

• An entrepreneur seeks to build a successful business in a new area. They are often considered innovative.
• Successful entrepreneurs must possess initiative, innovation, resilience, and the ability to learn from failure.
• Initiative means being resourceful, deciding what to do and when to do it.
• Resilience is vital during stressful and unpredictable times.

Financing a Business

• Equity Finance: Investment in a business where the investor acquires a share of ownership.
  • The owner does not have to repay the investment.
  • Taxation advantages exist.
• Debt Finance: Short-term (overdraft) and long-term (mortgage) borrowing from external sources by a business.
  • The cost of finance (interest) depends on the type of finance, source, and length of time.

Overdrafts

• Available at short notice.
• Offer flexibility.
• Higher interest rates (around 10% p.a.).
• Banks can demand repayments at any time.
• Suitable for businesses needing to cover employee wages, stock purchases, supplier invoices, or covering unexpected expenses.
• Smaller amounts (less than $100,000).
• Requires no security and is available at short notice.

Business Location

• Brick and Mortar stores: Location significantly impacts success.
• Online Businesses: Virtual location matters for Google search ranking.

Business Demographics

• Population characteristics affect customer spending, including age, ethnicity, gender, marital status, family size, and income.
• Understanding demographic changes is vital for business success.

Competition

• Mass market: Broad market (e.g., Coles, Westfield brands).
• Niche market: Specialized market (e.g., vegan food products, high fashion).
• Develop a competitive advantage through:
  • Lowering price for a wider market share.
  • Offering a different or innovative product with better quality or enhanced customer service.

Target Markets

• Determining who will buy the good or service is fundamental to marketing.

Starting a Business

• Start from scratch:
  • Owner has complete freedom over business setup.
  • High risk and uncertainty.
  • Difficulty in securing finance.
  • Time is needed to develop a customer base, hire staff, and establish supplier lines of credit.
  • Profits may not be generated quickly, and start-up time can be slow.
  • Flexibility to choose location, target markets, and growth pace.

Quality Control & Assurance

• Quality Control: Uses inspections and sampling to proactively reduce production problems.
  • Labor training is crucial to apply standards throughout the process.
  • Products are inspected, and defective products are disposed of, leading to potential waste.
• Quality Assurance: A system ensuring pre-set standards are consistently reached during production.
  • Aiming for 'fitness for purpose' and 'right-first-time' objectives.

Marketing

• Marketing involves strategic development strategies designed to maximize sales, increase brand awareness, and improve customer satisfaction, ultimately achieving the goal of profit maximization.

Employment Types

• Self-employed:
  • Individuals work for themselves.
  • Freedom and flexibility to work wherever and whenever.
  • There is no guaranteed income and lack of financial security.
  • They must pay for their own entitlements.
  • No income is earned if sick unless insurance exists.
  • Tax advantages.
• At home:
  • Boss pays the employee to work from home.
  • Flexibility exists, but motivation can be a challenge.
• Voluntary:
  • No financial payment is provided.
  • Contribute to the community and find satisfaction helping others.
  • No money is earned.
• Apprenticeship:
  • Workplace pays the individual to learn a job while working alongside experienced employees.
  • Earn less than a fully qualified employee.
  • Boss provides the required equipment.
• Traineeship:
  • Combines employment and training to gain qualifications.
  • Work part-time, allowing study.
  • Promotion after completing training.

Payment Terms

• Paid work involves performing services for an hour or more per week in exchange for income.
• Unpaid work is performed without receiving income.
• Entitlements: Non-wage benefits such as long service leave or sick leave.
• Pro-rata: Proportion of normal full-time benefits related to hours worked.
• Loading: Extra pay given to compensate casual employees because they do not have access to all entitlements.