• Review all of their personal and business loans. How do the rates, fees and terms compare to what else might be available with the same or another lender? Are there any obvious areas to save your client cost, time, or both?
• Do they have capacity to borrow more against property or other assets? If they can readily raise more debt, what purposes might they put that capital to so as to help their business and/or improve their personal wealth prospects?
• Are they experiencing any challenges, problems or difficulties with their current arrangements? Will an efficient debt consolidation package help ease cash flow? Are annual reviews and lender compliance taking up too much time that can be relieved by taking out a set and forget term loan?
It is best if you can get hold of the financial statements (Profit & Loss and Balance Sheet) of the business and, if you can, here are a few tips:
What to look for in a Profit & Loss statement.
What is the breakdown? Is it for existing commercial property loans, an unsecured overdraft, equipment finance, operating leases? Be sure to find out the actual repayments on these finance arrangements which will usually be significantly greater than the interest component alone depending on the loan term.
Rent paid to a third party:
|Tip No. 1: Interest paid: Is there a refinancing opportunity?
How much is it and how does it compare to loan payments on buying their own premises? Many small business owners are now acquiring their business properties within a SMSF
for long term wealth creation.
Rent paid to an associated entity:
|Tip No. 2: Buying can make more sense than renting, especially for long term wealth creation.
Are there other special purpose companies or trusts controlled by your client which have finance facilities in place? What are the terms, when do they expire? Is there a refinance opportunity?
What to look for on a Balance Sheet.
|Tip No. 3: Look for refinance opportunities to reduce costs or improve terms.
These are liabilities maturing in less than 12 months and may include things like overdrafts or short term loans. Are there savings to be gained by refinancing into more efficient and appropriate structures? Is there a hard core debt to be addressed?
Loans to Directors:
|Tip No. 4: Convert expensive or hard core debt into easy longer term loans.
Are there short or long term debts owing to directors or shareholders? Is the business able to repay them from current cash or near future profits? Would your client like to repay or reduce them if funds could be accessed?
|Tip No. 5: A refinance or loan increase can release equity to repay internal loans.
When reviewing financial statements at a high level, you are essentially aiming to get a picture of what the client’s current net income looks like in context with their asset versus financial liability position. From here you can determine what their maximum borrowing capacity will be. Have they reached a peak level or is there “headroom” to release capital?
Thinktank Property Finance is Australia’s leading specialist commercial lender. Established ten years ago, Thinktank has lent approaching $750m for the purchase, equity release and refinance of commercial properties around the country.
With an emphasis on set and forget loan structures with up front interest only periods but without ongoing fees, annual reviews or regular re-valuations, Thinktank offers Full, Mid and Quick Doc options on typical retail, office and industrial properties located in cities and regions with populations greater than 20,000. We can also provide finance for residential, mixed use and a variety of specialised properties including child care, hostels, reception centres and hotels.
Lending up to $3m per property and 75% LVR for Full Doc and SMSF loans, Thinktank will also lend up to $2m and 70% LVR under alternate verification and to 65% LVR on self-certified income. Whether owner-occupied or for investment purposes, we have a range of options to suit all situations. Up front commissions of up to 1.0% and trail of 0.50% can be selected on all loans.
With practically 100% of our loans introduced via the broker channel, we pride ourselves on giving back to the industry as best we can through ongoing delivery of deal workshopping, training and mentoring while also offering CPD points at accredited educational seminars. We are also now running “How to Prospect Effectively” sessions on a regular basis and for more information on when these are on in your area, please contact Peter Vala, Head of Sales and Distribution on 0468 989 555 or firstname.lastname@example.org.