Commercial / Business Lending NOW AVAILABLE
Whether you would like to review your existing commercial / business lending or you are looking to set up new finance, we can help you achieve your goals. When we do any business lending for you, you still end up with a contact person with the respective lender who you will deal with on a day to day basis once we have set the lending in place for you. The major benefit of using Hudson's Finance Division to source your loan is... we have access to a large number of lenders in the marketplace. This means that you don't have to do all of the running around checking the different rates, fee structures and loan features to determine the best loan product for your situation. Our systems allow us to do all of the checking for you and come up with a solution as to where your lending will be best placed.
Business lending is not just a 'simple' loan against a property to purchase, there are a number of options that can be combined when you are purchasing a new business or expanding an existing one. These options include Vehicle and Equipment Leasing, Factoring, Overdrafts, Lines of Credit, Business Cheque accounts and Credit Cards etc.
For those of you contemplating this for the first time, you need to take note that when purchasing any business, you need to be very careful. You need to keep your research up-to-date and run all information past an accountant who understands or specialises in small businesses.
Generally speaking, there are two main types of business purchases - purchasing a franchise, or purchasing an existing business that is not franchised. Below is some brief information on each of these options.
OPTION ONE - Purchase an existing business, non-franchise
It is difficult to generalise the process for the purchase of an existing non-franchised business, because the lending will depend upon the business purchased and the components that go into the purchase price.
For example, if the business owns its premises and the premises are a part of the purchase, we can lend against the premises themselves as part of the lending. If the business has equipment that is once again part of the sale, we can look at equipment finance for that portion of the purchase price. Also, if the purchase price includes motor vehicles, then we can look at leases as well, and the balance will need to come from cash. Also, Factoring can be available, which is based on the current debtors listing and the turnover of the business.
So this is a very general overview and we cannot be more specific until we have full information about the business that is to be purchased, as well as the level of your business experience, or your working experience and qualifications that are relevant to the new business, along with a detailed Business Plan and cash flow projections that not only show how you are going to maintain the business, but grow it as well.
OPTION TWO - Purchase a Franchise
Many franchise operations will have a lender associated with them that will do a loan against the business for a set percentage of the purchase price, minus the GST component. A large number of lenders will give you a short term loan to cover the 10% GST if you do not have enough cash to cover it, because you will be able to claim it back with your first BAS Statement and pay the 10% GST loan out in full.
So if you are buying a franchise, and the nominated lender does 60% lending, you then have to come up with the 40% balance plus costs in cash, or take out a loan against property for that amount. Generally speaking, if you need to borrow the balance against other property, then this lending, along with the balance of any other lending against the property or properties, will be restricted to a Loan to Value Ratio of 80%.
With a franchise, the lenders will generally lend the funds over the remaining lease term up to a maximum of 10 years. For example, if you're buying a franchise that is already running, which has premises that are leased and the terms are a five-year lease with an option for another five years, and they are two years into the first five years of the lease, then the loan will be written over 8 years.
Commercial/Business loans are structured as Principal & Interest. The interest rates have a margin built into them to account for the higher risk, and so are higher than normal residential interest rates by anywhere up to 2 to 2.5%. So it becomes very important to shop around or come and talk to us to make sure that you get the right interest rates, lending structure and on-going costs. There are hidden costs such as charges on unused funds in a Business Line of Credit and a whole range of things that you need to look out for.
Conclusion
There are so many options and varieties when it comes to business lending that it really does pay to contact us and have us look around for you. Even if you already have business lending in place, you should talk to our finance manager, and we will do a review and see how your existing lending structures stack up against the other products in the marketplace. Remember things change in the finance lending sector all the time and diffeent products are released often, and it's worth a 'checkup' just to manke sure you are on the best path possible for your business.
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