With the amount of scrutiny from regulators such as APRA and ASIC on residential mortgages, the banks are trying to increase their lending to businesses – and with ultra-low rates, business owners are finding commercial loans very competitive.
Here are some examples of what is happening in the world of commercial lending.
Typically these properties have a higher rental yield than residential properties. Banks will lend up to about 70 per cent of their value.
And, in the commercial world, lenders are less demanding in assessing whether-or-not you have the income to service the loan. Typially if you can prove the rent plus any surplus income you have is 1.5 times the interest on the loan, you can get finance.
One mid-size bank is very aggressive here; lending up to $1m at 4.45 per cent.
Buying Your Own Premises
Many business owners come to me as they have had enough of paying rent and want the security of owning their own premises (expansion plans are easier to implement when you know what you are doing).
The same financial metrics above apply; typically what my business clients do is buy the property in the name of another company they own and then rent it to themselves on commercial terms. That way they can always rent it to another business in future.
Self Managed Superannuation Funds (SMSFs)
Many of my clients are either buying commercial properties in their own Super Funds or transferring a commercial premises into it. The reason is that tax rates for Superannuation are very generous.
But lending in Superannuation is not straight-forward; you need to make sure that you have the Trusts set up properly.
Pretty much all businesses need a car. But they may also need vans, forklift trucks and fit-outs.
Arranging finance here is pretty straight-forward. And, if you own a property, some lenders will lend to you on a lo-doc basis at very attractive rates such as 4.9 per cent.
The ability to get finance is often key to a businesses’ success; sometimes arranging it can be very complex. If you want to discuss more about your finance needs, please contact me on 1300 30 67 67.