Brokers looking to diversify their income could benefit from a sound knowledge of the commercial market. But commercial deals can be tricky for the inexperienced. Lenders share some of the finance deals they’ve been able to make a reality for brokers and their clients.
La Trobe Financial
Self-employed applicants had been operating their business for 8 years and had recently signed a Contract of Sale to purchase the business premises via their SMSF
with settlement due on 30 June 2015. Purchase price was $500,000 and the applicants were looking to raise 70% LVR via a Commercial SMSF loan. Following lodgement of the application with a major bank, the applicants encountered two challenges: One of the applicants had 3 “paid” trade-related defaults totalling $48,000 on their credit report, and the SMSF would only have net assets of $250,000 following the completion of the purchase –$50,000 below the minimum threshold imposed by the bank. Due to the defaults, and the SMSF’s net asset position falling below the bank’s minimum threshold, the application was declined after 4 weeks in the system.
With regard to the first challenge, our Credit Analyst spoke to the introducing broker about the trade-related defaults and found that the defaults were incurred 5 years ago due to a major client failing to pay them for a six month period. All defaults were subsequently paid and each of the creditors still deal with our client. We treated this as one “credit event” (which is acceptable under our Commercial SMSF product). The second challenge relating to the net asset threshold simply isn’t a challenge for us at all as we do not have a minimum net asset threshold on any of our SMSF loan products. We were able to complete the transaction for the applicants at 70% LVR as requested, and completed it within 5 days of receipt to ensure the 30 June 2015 completion date was met. The broker was also pleased with the quick turnaround as the loan settled just in time to qualify him for his aggregator’s commercial conference.
Having specialist options across multiple asset classes allows brokers to structure better solutions for their clients. Specialist lenders are a great alternative for brokers and their clients when the major banks are unwilling to assist – including commercial transactions. This is the most commonly understood benefit which specialist lenders offer; keeping brokers and their clients achieving their goals. Assisting those that are under-served by the major banks has been at the core of La Trobe Financial’s service proposition since its inception over 60 years ago. Specialist lenders deliver much quicker than major banks and keep the process simple. A significant part of a specialist lender’s value proposition is speed to market. In this case study it took four weeks for the major bank to uncover two problematic components that are fundamental to the credit acceptance criteria for its SMSF loan product, whereas we were able to go from start to finish in five days, delivering a solution in time for both the broker and their client.
Broker approached ING
Direct with a refinance scenario for a client that had been banking with another institution for over 25 years. This broker had built a strong relationship with the client and wanted to split his banking and transfer some core debt to ING Direct
, leaving some other facilities with the existing institution.