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  • Businessmen - Can't prove serviceability?

Commercial and Industrial Property Development Loans including Specialised Securities

Many of our clients are businesspeople who have assets and income but, due to tax minimisation schemes, etc., are unable to prove adequate serviceability to banks. This is because their ‘financials’ bear little or no resemblance to their real income. Similarly, self-employed business loans are sometimes difficult to obtain due to inadequate documentation.

We do not usually require taxation assessments (except where proof of compliance may be required), cash flows, business plans or budgets, etc., for low doc commercial loans. Cash flows are sometimes required for construction loans and property development finance for progress payment purposes, especially if you are an owner builder and not capitalising interest. Usually, however, these are within the fixed price building contract.

We do not usually apply income or gearing ratios when considering mortgage proposals as many lenders do. Furthermore our credit checks are normally only conducted for the purpose of identifying undercharged bankrupts and/or for large unpaid defaults and/or judgments. This makes gaining approval for low doc commercial property loans, as well as self-employed low doc loans, a quicker, simpler process.

In relation to serviceability, many of our funders only require an accountant’s letter that states that the interest on the proposed commercial loan advance (or part thereof) will be claimed as a business expense for taxation purposes. It should also say that, in the accountant’s opinion, the applicant has the capacity to meet the payments due under the intended advance and that they will not cause undue hardship – or words to that effect.

Suitable securities include: homes, shops, offices, vacant land, factories, and farms – indeed almost any form of ‘real property’ is acceptable. This includes specialised securities such as service stations, squash courts, and cool stores!* The current Credit Act requires that borrowers declare the loan purpose – either a loan under the Credit Act – a consumer loan (house purchase, i.e. owner occupied, holiday, consolidate personal loans, vehicle purchases etc. – in other words, loans for personal use) OR in the case of commercial loans the monies are to be used predominantly for business or investment purposes.

* Loan to value ratios may vary with the type and location of security offered and in some cases EPA reports may be necessary (e.g. service stations).

How can we help? Call us now on 1300 131 876 to discuss your loan or complete our enquiry form and we’ll call you back.

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