Operating a successful manufacturing business, our client was seeking to purchase a site to move into and build their investment portfolio.
The business had demonstrated both significant success as well as clear opportunities for future product development and added machinery sales to their loyal client base.
One bank is extremely supportive of purchases for owner occupier sites and, provided servicing can be demonstrated, they can approve a loan to value ratio of 105%.
Yes 105%.
This equates to the full purchase price plus costs, which means you can potentially purchase your own commercial site without putting up any of your own cash.
Typically the loan is structured in 2 parts with an interest only component up to 80% of the value of the property and the balance of the loan being principal and interest, which effectively brings the loan down to an 80% LVR over time.
This structure reduces risk for both the bank and the business owner, allowing for equity to be built into commercial property while cash is preserved elsewhere.
However, while our client was operating a very good business, the director is an ex bankrupt.
They had previously operated another business that went into administration due to being severely impacted by the Brisbane floods of 2011.
While most would consider an ex bankrupt as incapable of gaining bank finance, we felt differently given their circumstances.
Contacting the insolvency firm that managed the previous administration event we established there was no evidence of poor management leading to the downfall of the previous business.
Flood maps were obtained demonstrating the client’s factory had definitely gone underwater causing operations to cease, with stock and machinery destroyed.
With this evidence we made the argument the bank should disregard the previous insolvency and bankruptcy and consider it the outcome of a force majeure event rather than an outcome of poor performance and governance.
Combined with the strength of the rest of the submission, the bank assessed the evidence and agreed with our position granting an approval with a 95% LVR.
The director was thrilled with the outcome.
Just a few days after settlement we also secured a $300,000 unsecured overdraft with the same bank for the client to enable them to import machinery.
Reach out if you’re thinking about your next commercial purchase or line of credit and want to do it better.
Get a better loan 👊
