Business and Commercial
There are a number of purposes for a business/ commercial finance. Some of these are,
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Purchasing an existing business (for example a newsagency or franchise under leasehold)
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Starting up a new business
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Provide working capital
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Purchasing commercial/ business premises
- Construction of commercial/business premises
- Developments including sub- divisions (generally construction of 3 or more units)
- Rural finance, including farm purchases and/or working capital
- Plant and Equipment
- Motor vehicles for business use
- Debtor finance
What types of business products are available?
In the current market there are many different options and product types. Some of these options include,
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Basic variable business loan.
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Commercial or cash advances.
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Fixed interest business loans, generally up to 5 years.
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Business equity facility.
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Leasing, hire purchase or chattel mortgages. This product is generally used for plant & equipment and motor vehicle purchases.
Some financiers actually offer a low doc commercial product. This requires the borrower to complete a self certified Income certificate. Generally with these types of products there is a requirement that the borrowers accountant also signs a statutory declaration stating the borrowers can afford the loan
How much can I borrow against my property/ business?
This will depend on your income and service ability. Service ability calculations and requirements will vary between lenders.
Income may be in the form of wages, business profits and cash flow projections.
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Generally on a secured basis most financiers like to lend around 70% of the property value for commercial or 80% if the property is residential. I point out there is no set rule in this area, as in some cases financiers may lend up to 100% or more of the property value. Each proposal will vary.
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Generally the interest rate is cheaper for amounts that fall with in 70% of commercial value or 80% of residential value. For example, if you purchase a freehold business for,
| Land and Buildings (Commercial) |
$200,000 |
| Business (goodwill/plant etc) |
$100,000 |
| Total |
$300,000 |
and you wanted to fund $200,000 and the financier is happy with the
overall deal, they may fund as follows,
| Loan # 1 (cheaper rate $200,000 @ 70%) |
$140,000 |
| Loan # 2 (higher rate) |
$60,000 |
| Total funding |
$200,000 |
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Some financiers may lend up to 60% against a specified franchise.
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Some financiers will also lend against business assets, such as plant and equipment and in some cases the business debtor book. These assets are generally secured against a debenture which is a charge lodged against a company or a business bill of sale over a partnership or sole trader.
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There are also specialists who will fund against the business debtor book.
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Cash Flow Lending.
Summary:
There are many Financiers in the market, with a variety of business and commercial loan options available to you. By using a broker this can be streamlined and made easier for you and may save you considerable time.
One important point to remember when assessing the best options/products for you, you are not limited to using one product. For example your requirements may be better suited to have a business loan plus an equity line facility or portion of loan at a fixed rate and a portion at a variable rate. Each person’s requirements will be different and this is where a good broker may be able to assist you.
