Frequently Asked Questions (FAQ)

Below is a list of questions commonly asked - you may have something you would liked answered not listed. Feel free to contact us direct

How much do you charge for you service?

In many cases there is no additional charges for my service. I am paid a commission by the lenders upon settlement of the loan that is sufficient to cover the time it takes me to put a transaction together. For complex transactions however there may be a mandate/commitment fee to cover my time – this is discussed prior to me beginning any chargeable work. Other fees and charges (generally just reimbursing costs) will be discussed prior to charges being incurred.

An initial meeting to discover your goals and objectives is always free and every now and then I might even throw in a free coffee!

Whatever the cost there will be a clear benefit to you as a customer using my services.

How do banks assess Business/Commercial Lending

In the Banking World we talk about the 5 C’s of credit being:

  • Capacity (can you afford it based on the historical or projected financial performance of the business);
  • Collateral (what is securing the transaction and how likely is it will cover the debt in a default);
  • Character (who is running the business, what experience do they have and are they trustworthy – in other words do they have the ability and willingness to repay the debt back);
  • Conditions (the state of the wider industry/economy, regulations that impact the industry and even level of competition); and
  • Capital (how much equity is the business owner contributing to this specific transaction and also can cover how much liquidity is within a business to cover unexpected events);

Business Bankers and Risk Officers will want a picture of what the above looks like in order to see if it is something that falls within their risk appetite.

When assessing it is unlikely that every single box has a big tick next to it hence why many business banking applications are assessed manually.

The art of submitting successful applications is a full understanding of the business currently as well as an understanding of the goals and objectives and key business strategies in order to provide mitigants to risks identified to the business and in particular to the continuity and consistency of cash flow. A well written application presented to a bank with the appetite to lend to that particular business has a high chance of being approved – it is just a case of marrying the two together!

What is the lending process?
Depending upon what kind of loan you are seeking there are different requirements but in general the process is as follows:
  • Inquiry & Fact Find: Initially I am looking to determine what you are looking to do in the short term, your background and what you are looking to do in the long time. This can be done on the phone or in person. I also need to collect relevant information on who you are and your financial position (income and asset/liability position) – this is called a Fact Find;
  • Verification & Solution: Once I have enough information to recommend a suitable product I then get to work! We need to collect documentation to back up the information provided at the initial stage (for example financial statements, BAS reports, ATO tax portal, bank statements etc) to satisfy potential lender’s requirements. There are a number of lenders and products to consider and my aim is to provide a solution which fits both your current needs and your future goals and objectives – pricing is also discussed at this stage and potential terms and conditions;
  • Application: Once a suitable lender/product has been found an application will be lodged with the lender using the information and documentation collected. Occasionally and depending on the size of the transaction, as part of the process we may meet with a representative of the lender to build a relationship as part of the application process. This stage is critical as a great representation of you and your business will give you a better chance of success;
  • Approval & Valuation: Approvals come in two forms – conditional, which means there are conditions imposed by the lender that need to be satisfied before the fully commit to providing the funds (such as additional information required to support the application), or unconditional, which means you’ve ticked all the boxes and the lender is ready to issue documents! The most common condition if property or business security is involved is a valuation…normally this happens post approval and the time it takes will depend on the type of security (residential security being the quickest and a business ‘going concern’ valuation generally taking the longest). Valuation costs generally sit with the borrower hence why it is conducted post approval;
  • Documentation & Settlement: Once documents have been issued it is a simple case of signing them. Usually you do not need to sign before a solicitor but obviously the option is always there to get appropriate advice particularly in a large and complex transaction. Some lenders now issue ‘e-docs’ so documentation can be issued and sent back same day. The lender will verify the documentation once returned to ensure that all conditions have been met (if applicable) and that every document has been executed correctly. Once they are happy they will usually organise a settlement – if there is a third party vendor involved they will usually work with their solicitor/conveyancer to settle on a contracted date. If it is working capital for the business, it may be as simple as the lender then establishing the system ready for the business to use;
  • On-going Maintenance: Some loans require annual reviews and/or provision of documentation at set periods of time to meet conditions in the loan contract.
At each step of the way I am here to assist you through the process as a trusted advisor. Depending upon the loan type some of the above processes can be very quick (asset finance and urgent business loans generally completed within a few days) through to some processes that can be lengthy due to the complexity of the transaction and corresponding negotiation (larger commercial property transactions or business loans secured by only the business).
Do I have to use my own home as security?

When lending for business purposes the lending can be either secured by property (residential including your own home or commercial), secured by equipment/other assets (for asset finance), secured by the business in certain industries or unsecured.

As a general minimum the Director’s of a business will be required to provide guarantees and as a maximum there can be a bundle of securities against a loan.

Again it will come back to the appetite of particular lenders, the structure of the overall transaction, strength of other parts of the deal (e.g. maybe servicing is very strong) and sometimes the purpose and reason why you don’t want your home tied in. I will always try to work hard to negotiate a deal suitable to you and what you are looking to achieve in the long run.

I've had business and commercial loans in the past and they are generally more expensive than home loans - why is this? Also why do they not always move with Reserve Bank rate changes?
Okay – firstly perhaps your business loan was expensive as you didn’t use the experience and contacts of a finance broker to get you a cheaper deal with the same terms! (too salesy perhaps!!! Couldn’t help it)… Generally business loans are more expensive than home loans as they are more expensive for the lenders to have on their books. In particular banks have to hold more capital in their balance sheet for business loans as opposed to home loans due to regulation so they cannot lend as much for every dollar they hold in capital. The best way to think about it is business loans are on average more risky than a home loan (i.e. more likely to cause a loss to the lender) so there is a risk/reward proposition. In terms of rates, lenders fund their own balance sheet on rates that are not directly aligned with the Reserve Bank cash rate as they have varying sources of deposits some of which are from offshore funders. There is also less media pressure around rate change time for banks to move rates as opposed to home loans. Generally banks will make a decision on their home loans before their business loans. If this is an issue though there are products available that are based off a market rate such as the Bank Bill Swap Rate which is effectively a more transparent way of pricing. And of course fixed rate loans provide piece of mind and consistency as they are unaffected by rate movements… I’m always happy to discuss the above in real life having worked in the Treasury Department of an Australian bank however it is a lot more complicated than the papers make out! Contact me now
I have a reasonably large commercial property investment loan and the bank asks me for an annual review every year. Is this the same for all lenders?

Whilst it is common for loans over usually over $1m to be annually reviewed (and sometimes repriced!) there are lenders that are comfortable to have 'set and forget' type loans with no annual reviews.

The on-going requirements of lenders is an important consideration when entering into a loan agreement hence why it is good to have a broker on your side to either find a lender that suits your needs or negotiate the terms and conditions that may cause some pain. And of course we are here to assist you with annual reviews in any case so we can submit the required paperwork to the lender to ensure a smoother process.

 

How quickly can you turn around asset finance? I've heard sometimes it can be as quick as couple of days...

Some lenders are very good at asset finance transactions and make it very smooth for the business owner. Generally this is for 'standard' types of good and some are able to process transactions with limited information - some loan structures may even allow for approval one day and funding the next!

If you regularly purchase equipment an asset finance facility limit may be able to be set-up which can speed things up down the track! Of course things are always changing and certain times of the year some lenders will get bottlenecks in their deal processing.

In general though asset finance can be quicker than other types of lending such as residential or business/commercial.

I am struggling to pay back my business loan and have had letters from the bank I am ignoring. What can I do?
The first thing I suggest is pick up the phone and give me a call - no need to be embarrassed as trying times test many at some stage or another. The most important thing is that you do something about it and quickly. I have experience dealing with distressed businesses for a number of reasons and have found that a well presented case (and potential solution) will usually at the very least provide you some time to work through to get back into a more sustainable situation going forward. The last thing a lender wants to do is sell up assets (particularly for complicated structures) and getting on the front foot shows that you have a reputable character and understanding of your business and they will generally look to work with you rather than against you. It may be the case that you are better suited to another lender who can structure repayments to make things easier - it all depends on circumstances. As we generally will not receive a commission from the bank in this situation there may be fees for this service however the terms and conditions will be agreed prior to you incurring any costs but it costs you nothing to give me a call or email now!
How long does it take to get an approval for a business loan?

This is a difficult question to answer and the reason is that business lending is so varied in terms of the purpose of the lending, the structure and security for the loan, the differing policies for different industries - there is generally a lot for a bank to assess before making a decision.

If you are after fast money however there are some lenders that can turn around a proposal and fund within 24 to 48 hours - see Urgent Business Loans.

One thing you can be assured though is that we do everything possible to keep things moving through the system efficiently and by providing lenders what they require in the format they need upfront we can reduce the overall time for an application.

Contact me today for a discussion and an outline of the process required to get business finance.

I'm starting up a business and been told by friends I cannot get finance - is this the case?
This is not always the case and I have assisted customers in the past start-up their businesses. Refer to the question above about how a lender assesses credit - it just means we have to work a bit harder putting together the right elements in an application to lower the perceived risk from the lender. Start-ups require a bit more information as they are generally riskier to lend to than an established business with proven history. The types of information lenders may be looking for will be a CV on the business owners and key staff, budgets/cash flow projections and a full business plan. As a start-up business owner though a lot of this information is going to give you a lot of guidance anyway in how you roll out your business so worthwhile putting a lot of thought into it - don't just do it because the lenders have asked for it! Contact me today to discuss further on how we can get you prepared for a successful finance application.