Commercial and Business Lending Update
With the advent of additional regulation and the pending banking royal commission report in February 2019, the major lenders have become quite stringent with their commercial and business lending. Construction and development finance has become more specialised and has opened the door for many third-tier private funders to enter the market. Funding for professional services such as legal, medical, engineering and financial services have received renewed focus from several lenders, providing funding against going concerns, often without property security! It is becoming increasingly evident that the major lenders have different niches and specialties.
A few key tips when considering your business and commercial finance requirements:
- Consider diversifying the lenders you use (where appropriate), whilst maintaining a main lender for your trading account;
- Where possible utilise a different lender for your personal funding i.e. home loans, to ensure these assets are not cross-securitised with your business;
- Consider limiting the term of the loan facility to the life of the asset i.e. shorter term (< five years) for a vehicle loan;
- Avoid using cashflow to purchase assets, unless you are confident this cashflow will not be required going forward; and
- Utilise the correct loan facility for the correct purpose i.e. using your overdraft to assist with short-term cashflow needs, rather than longer-term core debt.