Business and Commercial Finance

Business people often use “unsecured” to mean “nobody can come after me”. That is not what it means. Unsecured means there is no mortgage over real property. The lender almost always still takes a General Security Agreement over the company’s assets, registered on the PPSR, and a personal guarantee from the directors.

General Security Agreement

A security interest over the company’s assets — plant, stock, debtors, goodwill — rather than over land. It is standard on facilities described as unsecured.

PPSR

The Personal Property Securities Register, where a General Security Agreement and most asset finance interests are recorded. A lender searches it before lending and finds every registration you have ever given.

Personal guarantee

A director’s promise to pay if the company cannot. It is a personal obligation and it does not end when the company does.

Ranking

Where a lender sits in the queue if security is realised. A second-ranking lender is paid only after the first is paid in full, which is why ranking drives pricing more than anything else.

There is no best product. There is only the product that matches the shape of the money you need and the shape of the money coming back. This is the table we work from in the first conversation.

Residential lending is largely a formula. Commercial lending is a judgement, and the judgement is made by a person who reads a submission. That is why how a file is presented changes the answer.

• Serviceability. Earnings before interest, tax, depreciation and amortisation, adjusted for one-off items and director drawings, tested against the proposed repayments at a rate above the actual one.
• Security. What the lender can realise, what it is worth on a proper valuation, and where the lender ranks against anyone else on title.
• Character and conduct. Twelve months of bank statements read line by line. Dishonours, gambling, ATO direct debits that stop, and existing short-term lenders all show up here.
• The ATO position. An unlodged BAS or an unmanaged arrears balance is a serviceability question and a conduct question at once. Lodged and disclosed is always better than hidden.
• The exit. Every commercial facility ends. The lender wants to know whether it ends in a refinance, a sale, or the loan simply amortising to zero.

Full doc, lease doc and low doc

Full doc means two years of financials and tax returns for the business and the directors. Lease doc applies to tenanted commercial property, where the rent under the lease is tested against the repayment and the borrower’s own income barely features. Low doc relies on an accountant’s declaration, BAS lodgements or business bank statements instead of finalised returns. Fewer documents usually means a lower loan-to-value ratio and a higher rate, because the lender is pricing the information it does not have.

Nothing slows a commercial file down like a document arriving three weeks late. Getting this pack together before we approach a lender is the single most useful thing you can do.

1. 01

   We read the whole position first

   Not just the loan you asked for. Every facility, every arrears balance, every guarantee, and what the ATO account looks like today. Half the time the request that walks in the door is not the request that should go to a lender.

2. 02

   We tell you the honest number early

   What is likely to be achievable, what it will probably cost in fees and time, and where the file is weak. If the answer is that you should fix a lodgement or wait a quarter, we will say that.

3. 03

   We build the submission

   A written credit case with the story, the numbers, the security position and the exit, supported by the document pack. Commercial credit officers approve arguments, not application forms.

4. 04

   We take it to the right lenders, not all of them

   Two or three lenders whose appetite matches the deal. Shotgunning a file across a panel leaves enquiries on your credit file and makes the next lender ask why the last one passed.

5. 05

   We manage valuation, conditions and legals

   Valuers, solicitors, your accountant, and the incoming and outgoing lenders. Conditions precedent are where deals die quietly, so we chase them daily.

6. 06

   We stay after settlement

   Annual reviews, covenant dates, expiring interest-only periods and the refinance out of any short-term facility. A private loan with nobody watching the expiry date is how a manageable situation becomes an expensive one.

Some commercial files are ordinary. Some have a date on them. A director penalty notice runs on a 21-day clock from the date on the notice, not the date you opened the envelope. A statutory demand gives a company 21 days from service to pay, reach agreement, or apply to set it aside, and after that the company is presumed insolvent. Bank credit committees do not move at that speed.

• Private lending and caveat funding exist precisely for this window. They are priced for speed and risk, and they are a bridge, not a destination.
• The right sequence is almost always: fund the deadline fast, then refinance into a bank or non-bank term facility once the pressure is off.
• Never draw short-term money without a written, dated exit. The exit is the product.
• If the underlying question is whether the business is solvent, that is not a broking question. Speak to a registered tax agent or an insolvency practitioner, and do it before you borrow.

Commercial finance carries costs that residential borrowers are not used to seeing. We would rather you knew them at the start than found them in a letter of offer.

• Application or establishment fee, charged by the lender and often expressed as a percentage of the facility.
• Valuation, paid by the borrower, and on commercial security it is a full inspection valuation rather than a desktop.
• Lender legal costs, which on commercial and private files are usually passed through to you.
• Line or facility fees on revolving limits, charged whether or not the limit is drawn.
• Annual review fees on facilities with a review date.
• Broker remuneration. We are paid a commission by the lender on most bank and non-bank facilities. On some specialist and private transactions a fee is payable by you, and if that applies you will see it in writing, with the amount, before you commit to anything.

We tell you the true state of things early. Bad news travels better when it travels straight.

WeL’nd operates as a credit representative, is a member of the FBAA, and offers external dispute resolution through AFCA. We are a broker. We are not a lender, we are not a debt-management or credit-repair service, and we do not negotiate debt waivers with the ATO.