Commercial Lending

Commercial lending is an extensive market, i.e., loans to businesses from sole traders and partnerships to family companies to multinational traders. Loans to start or expand businesses, buy shops, factories or hotels, or refurbish premises. There is a wide range of companies that specialise in commercial lending. They secured such lending on the company’s property or other assets. They set the interest rate at a specified margin above the lender’s base rate. The lender’s risk to a particular company will decide the interest rate. This will be assessed by looking at the company’s past performance (where applicable), business plans, projected profits and management quality, as well as the business sector in which it operates.

Commercial Purchase in Melbourne

Client Background:

Raymond is a business owner who operates many successful retail stores in Melbourne. He has been renting his current premises for several years, but now wants to purchase a commercial space to secure his future and invest in his business.

Property Overview:

Raymond has identified a commercial property in a prime location in Melbourne’s CBD that is suitable for his business. The property is a 200 sq. m. retail space on a busy street, next to public transport hubs, major shopping centres and entertainment precincts.

Challenges:

The commercial property market in Melbourne is competitive, and prices can fluctuate. As a small business owner, Raymond also faces the challenge of managing rising interest rates and ensuring sufficient cash flow to sustain his business operations and repay the debt.

Financing:

Raymond has approached several lenders to secure financing for the property purchase. After careful consideration, we secured a financing package from a reputable bank. The financing includes a loan for the property purchase and a working capital loan for his business operations.

Outcome:

With financing secured, Raymond has purchased the commercial property and now rents it out to his business. He is pleased to have secured a long-term investment in a prime location and invested in his business’s future. He believes that owning the property has provided him with greater stability and control of his business operations, while also providing him with an opportunity for future capital gain.

Hotel Purchase in Brisbane

John owns several successful businesses in the heart of Brisbane and has decided to diversify his investments by purchasing a hotel. After conducting extensive market research, John has identified a boutique hotel in a prime location that he believes has significant growth potential. The hotel is up for sale, and John has negotiated a purchase price of $5 million.

John did not have sufficient funds available to purchase the hotel outright, he investigates private finance options. After consulting with his financial advisor, John approaches a private lender who specialises in commercial property loans.

John is required to contribute $1 million towards the purchase, which he has available through equity in his restaurant business. The lender requires the hotel to be used as collateral for the loan, so should John default on the loan, the lender would claim ownership of the hotel.

With the private finance in place, John can purchase the hotel and begin implementing his growth strategy. John plans to invest a further $1 million into refurbishing the hotel, with a focus on upgrading the existing facilities and enhancing the hotel’s brand.

Over the next 10 years, John’s hotel business experiences significant growth in revenue and profitability. He can repay his loan on time, and his investment in private finance has paid off. The hotel is now worth $10 million, and John is considering the option of selling the business and moving onto new ventures.

Hotel Purchase in Newcastle, Australia.

• Property details

In regional New South Wales, the hotel came with an established bar, dining area, thirty-five rooms and gaming license.

• What did the client want?

Because of competition at the Auction, they purchased more than expected. We informed the current bank of the new purchase price, but they would not consider increasing their loan amount.

• Key points

When the LTV (Loan to Value) exceeds a certain level, in most cases, higher leverage can attract higher fees and charges.

• What did we do?

We prepared an in-depth presentation displaying the borrower’s track record at running hotels. Then, we presented our case that the borrowers were credible for higher leveraged funding. After, we received an ideal offer for finance.

• The result

Funding took place after they met the conditions. The clients were pleased with the outcome.

• 70% LTV
• 8%
• 3-year term commercial bills

A service station purchase in regional New South Wales.

• Property details

Well located for refuelling, this service station had a long-term lease with a significant supplier.

• What did the client want?

Because their existing lender would not increase the leverage on current liabilities, they tasked us with assisting the investor in expanding the influence on reasonable terms.

• Key points

Due to specialised security, most lenders reduce the loan to value ratio for service stations.

• What did we do?

We searched around for the ideal lender – one that our client had not yet come upon. The lender we introduced offered excellent terms.

• The end results

The client was pleased, so we formed a strong business relationship.

• LVR: 70%
• Rate: 4.5%
• Term: 10 years

Commercial purchase in Randwick.

• Property details

A detached dwelling zoned mixed-use was used for medical practice, providing an opportunity to invest or occupy.

• What the client wanted

The client wanted to buy a new commercial property for his medical practice. So, they tasked us with sourcing a suitable lender.

• What did we do?

We knew of a policy from a primary lender that the client could benefit from. So, after the client agreed to our terms of engagement, we arranged a meeting between the lender and borrower.

• The end results

The meeting went well. This was a reminder that we continue to deliver extraordinary results by being aware of current lending policies and maintaining close relations with the lenders.

• 90% LVR
• 1% per annum
• 10-year term

Renovation on commercial property.

• Property details

A “muscle car” and prestige vehicle restoration business in Dandenong Melbourne needed more room in his workshop.

• What did the client want?

A considerable amount of space in the workshop was used to store spare parts and equipment for an office. They required finance to renovate and build a mezzanine level in the workshop to keep the equipment and a small office.

• Difficulties along the way

The client was unaware that he had a credit impairment on a mobile phone used by his son in the business. But they sorted the issue out with the lender, who accepted the situation.

• Key point

Prime lenders will finance specific credit impairments, although it must be paid before funding occurs.

• The result

We facilitated finance with a central bank for the renovation, allowing him to store 5 more vehicles for customers wanting work done to their cars. As a result, this investment increased the value of business and workshops.

Lease doc on a commercial property in regional New South Wales.

• Property details

The property had renewed a long-term lease that ensured rental returns from a government department with fixed annual rental increases.

• What did the client want?

The purchaser was self-employed and wanted to borrow 50 per cent of the price. But the client’s financial records were not ready, so we needed a lender with a flexible policy.

• Key points:

Other than your typical Banks, specialised lenders have flexible lending policies.

• What did we do?

On signing our terms of engagement, we arranged a meeting with the lender.

• The end results

The client was pleased with the outcome.

• LVR: 50% LTV
• Rate: 4.25% interest only
• Term: 25 years