Are you looking to purchase a commercial building?
Or do you need help getting a better deal?
Are you tired of having to present financials every 12 months and renegotiate your commercial loans?
We can help!
Getting a loan for a commercial building is an exciting time. But how would you feel if a couple of years down the track your bank calls in your loan (meaning they give you 30 days to repay it in full) and you have never missed a payment?
Unfortunately I have seen all too often commercial borrowers being fed to the wolves as banks look to protect their balance sheet or simply profit from your demise.
Most business owners buying a commercial property have fairly similar expectations to that off purchasing a home. That is you sign up for a mortgage and your belief is that, as long as you maintain your repayments over the term of the loan than everything will work out ok.
Unfortunately small and medium business owners purchasing a commercial property are not afforded the same protections they receive under the National Credit Code when they purchase their home.
Did you know that you can be in default on your loan and never miss a payment!
That’s right you can be in default and never miss a payment!
I have found 3 things that catch most commercial borrowers out and in many cases they can be avoided.
When you first apply for a loan the banks make you jump through the hoops to ensure you can afford the repayments. Business is going great, you are in growth phase and the bank wants in.
But every business, just like the economy will go through tough patches. Profits might be down or dissapeared and out of no where the bank gives you a call for a review. The banks managers job is to protect the bank balance sheet and after seeing your financials the bank might decide that you can no longer afford the existing loan. You meanwhile are working hard, never missing a payment, in fact your missing out, your doing without to make sure you never miss a payment. But if the bank manager decides that you are looking to much of a risk, that if they call in the debt now they have a great chance of getting everything owed. They might decide it is better to act now instead of waiting for things to get worse.
Unfortunately this is not a scare tactic. Take a look at the following article in the Sydney Morning Herald that putts a spotlight on engineered defaults by the banks.
As a business owner we all like to be in charge of our own destiny, if you are with a bank that conducts loan reviews, it is time to give us a call. We work for you, we can help you create a strategy to protect your assets and at the same time choose the right lender for you that puts you back in the drivers seat of your business.
When most people go directly to the bank they generally go cap in hand and will jump through whatever hoops is necessary to get a loan. The Bank manager will act like your best friend, but in reality they should be treated more like a wolf in sheep clothes.
The bank managers role is to make money for the bank. That includes protecting the banks interest when things go wrong. I have seen time and again banks strategically protecting themselves with the clients completely unaware. Banks will cross collateralize a clients assets and advise that you get a better deal by bringing all the business to them, but it can come at a huge cost. What happens are all your assets are now tied up and tied together. You can't sell any assets without the banks approval. Worse still when you go to make changes it can become very expensive. The bank will now want a new valuation on each asset and if the valuer is feeling pessimistic about the economy you might be struggling to get a realistic valuation. If any of your assets have now fallen in value it can bring down your overall borrowing potential.
At Mango we are well aware of the pitfalls and we can work with you to structure your assets and your borrowing to give you the best protection possible.
Now I am not trying to be derogatory to any bank manager at all. In fact I deal with bank managers all the time and many of them are very nice people and some of them I regard as good friends. But I know their shortcomings, and so do they. At the end of the day they are paid by the banks to make the bank a profit. And if they fail they are out of a job. Many bank managers bonus will be tied to the profit of their portfolio, so the bank manager will focus on getting the best margin possible on each loan and ensuring they don't lose money on defaults. They are paid to keep a close eye on their portfolio, conduct regular reviews and continue to bring in more business.
Their focus is profitability, so sometimes they have to make decisions that will not be too popular with their clients.
As a broker we might be paid by the banks, but our focus is solely on looking after our clients. We don't care about the profitability of the bank. We just care, that our clients are looked after, and protected to grow their business. As we help our clients, by getting better rates, better terms and conditions our clients also help us grow our business by referring their friends, business partners and family to us.