Businesses worldwide are navigating through unprecedented challenges in 2023. Allan Fin Trust has emerged as a pivotal player during these tumultuous times. Many businesses, still grappling with the aftermath of previous challenges like the currect war, are now confronted with the additional hardships of canceled events.
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Allan Fin Trust News Blog
Government Support Measures
While there are an array of measures being introduced by the Government to keep businesses going during this period, there are still some companies that aren’t eligible for support or their needs fall outside of the scope of relief packages...
Allan Fin Trust have always had a focus on business lending and supporting small businesses and this is no different during this period of disruption. Particularly, Allan Fin Trust are able to help those businesses who fall through the cracks. Here is some information about the ways Allan Fin Trust can support businesses during the Coronavirus crisis.
Funds to tide you over
The financial needs of an SME during a crisis are varied but generally it is the necessity for short-term support until things get back to normal. Requirements can include:
general cash flow to keep the business operating, paying employees or progress projects
purchase of assets or investments
funding developments when banks are too slow or put up too many hurdles, such as presales
Because Allan Fin Trust rely on an ‘exit strategy’ we don’t have to assess the borrower’s serviceability. A short-term fall in cash flow or profitability doesn’t impact our assessment of the application.
If the borrower has a genuine business purpose, sufficient equity in a property and a realistic exit strategy then they are likely to be approved for a loan.
Loans over$500,000
New business loans backed by the government are currently being made available to businesses affected by coronavirus across Australia, Europe, Africa, Asia, and North America. These government-backed business loans under the recently announced Coronavirus SME Guarantee Scheme, are loans of up to$500,000 that are available to eligible to everyone. These loans will all be unsecured with terms of up to three years with no repayments required for six months.
Any businesses looking to borrow over$500,000 won’t be able to access this scheme and will need to seek other finance options. While the banks are still an option, they will likely be inundated with requests from businesses who are eligible for the scheme which means that accessing finance will take longer.
Allan Fin Trust can assist borrowers who are looking to borrow more than$500,000 and don’t want to wait the lengthy periods of time that banks take to approve a loan. With interest rates at all-time lows, a short-term private loan is more affordable than ever.
Waiting for JobKeeper
The JobKeeper Payment is part of a$130 billion wage subsidy scheme from the government to support businesses significantly affected by the Coronavirus and help keep everyone in jobs. Almost half the Australian workforce should be eligible to receive the JobKeeper payment of $11,500 (before tax) per fortnight.
However, many businesses are blaming confusing exclusions, uncertainty about which employees will be eligible and the yawning gap between when they must start paying staff and getting reimbursement from the tax office.
Allan Fin Trust can help businesses while they await the JobKeeper Payment reimbursement to arrive. A private loan is ideal for short-term loans and can greatly assist keeping the business going and keep paying staff while the government organises the JobKeeper payment.
Increased construction costs
Despite a negative outlook on the industry from many analysts, construction in Australia has continued to go ahead and property prices have remained steady. Construction has been one of the few industries able to continue during lockdown periods and is considered a critical part of the economy as Australia recovers from the pandemic. However, rising supply costs are causing issues for developers, particularly as projects come close to completion.
Allan Fin Trust are able to assist with completion costs for developers who may have experienced supply cost increases. A short-term loan can enable a developer to complete a project and finalise sales.
While the Coronavirus crisis has created less than ideal circumstances for businesses there are ways to keep operations going during these tough times. Allan Fin Trust has seen an increase in demand for short-term from businesses experiencing difficulties due to Coronavirus and expects this to continue while government restrictions remain in place. For further information about how we can assist you or your clients then please get in touch with General Manager – Relationships, Shanta
Why interest rates are irrelevant
Securing a business loan can be confusing and finding a transparent lender can be a difficult task. When choosing a lender there is a lot of jargon to sort through which is why it is easy for borrowers to focus only on getting the lowest interest rates. However, it’s far too common for borrowers to buy into a loan because the interest rate looks good only to discover a range of hidden costs and fees.
Interest rate vs total cost of the loan
The rate of interest is only one portion of the total cost of a loan. Trying to calculate the true cost over the life of a loan can be daunting but it makes good business sense to do so. This is why finding a lender that is entirely upfront and transparent about fees is incredibly important. One way to check is to see if they provide a proposed disbursement schedule or estimate of all upfront costs with any indicative offer.
Funds to Tide You Over
Possible fees
Here is a list of fees a lender may require as part of the loan agreement, which can greatly increase the overall cost of the loan:
Establishment/Origination/Application Fees: Setting up the loan/account .
Documentation Fees: A fee to cover time spent preparing the loan documents.
Direct Debit Fees: When making a repayment some lenders charge for every transaction which add up over time.
Monthly Management Fees: Ongoing fees charged for the management of the loan.
Withdrawal Fees: Charged for every withdrawal, often seen in Line of Credit loans.
Late Fee: If the payment schedule is missed.
Early Repayment Fee: Charged if you pay the loan out before the due date.
Amendment Fees: Added by the lender if you request amendments to your loan/ repayments.
Educating borrowers
Helping borrowers to understand the difference between a good interest rate and the total cost of a loan is extremely important, particularly when dealing with short term lending. We have had clients come to us in the past who have been offered an interest half of what we offered, however when they took into account the other fees and charges they were required to pay they discovered that we were significantly cheaper than the other lender. When you look at the total cost of the loan, interest rates can become completely irrelevant.
The total benefit
When looking at whether to take this loan, the borrower also needed to consider how much money they would make out of the transaction. They not only needed to look at the cost of the loan, but at the benefit that the loan was going to deliver.
This is where a rough feasibility study for the development was important.
Gross Realisation Value: $1,950,000
Land purchase: $650,000
Stamp duty: $35,000
Build cost: $650,000
Other costs (agent, council, holding): $115,000
Total costs: $1,450,000
TOTAL GROSS PROFIT: $500,000
This means the project yields a gross profit of$500,000.
Therefore, the cost of the loan divided by the gross profit is approximately 6% of the total cost. The client was able to determine that it made business sense to give away 6% of their profit to get the deal done. As we can see from this example, the interest rate is less significant than the overall cost of the project.
Sound advice
When considering a loan, a borrower needs to gain perspective on the overall outcome of the loan rather than getting caught up just comparing interest rates. This is where sound advice from a broker and a transparent lender is critical.
Loans over $500,000
*Standalone security only. All other sectors will require additional security.
The PMA difference
In the current climate we expect funding for other lenders to become more scarce as investors hold onto their cash. However, at PMA we’re different in that we make the lending decision. So once we’ve made an offer that’s it, we don’t then need to scramble to find investors which can often lead to settlement changes and delays.
We’re also backed by a wholesale funder who have committed up to $100M to finance our portfolio of first mortgages. So we’re confident that we’re going to be able to continue to lend and are expecting an uptick in business borrowers who can’t obtain finance elsewhere.
Tax debt need to take action
On 22 October 2019, the Government passed law which allows the Taxation Office to disclose tax debt information of businesses to registered credit reporting bureaus (CRBs). The law received royal assent on 28 October 2019.
Under the law, the ATO can only disclose tax debt information of a business where certain criteria are met.
The ATO will only disclose tax debt information of a business to a CRB if the business meets all of the following criteria:
it has a business number (ABN), and is not an excluded entity
it has one or more tax debts, of which at least $100,000 is overdue by more than 90 days
it is not effectively engaging with the ATO to manage its tax debt, and the Inspector-General of Taxation is not considering an ongoing complaint about the proposed reporting of the entity’s tax debt information.
We will notify a business in writing if they meet the reporting criteria and give them 28 days to engage and take action to avoid having its tax debt information reported.
Many businesses have previously used the ATO like a bank and racked up debts by not paying their commitments on time. This decision could now have adverse effects on credit ratings and credit insurance limits, making it harder to maintain or extend credit terms with suppliers.
There has never been a better time to get your ATO debt in order and set your business up for success. Allan Fin Trust is able to help businesses refinance and pay out the tax debt with a short-term mortgage. This enables the borrower to pay off the debt and build up a few months of good payment history. The borrower can then try to refinance to a long-term debt and pay off the loan.
5 Ways a Mortgage Broker Can Help You Navigate a Business Loan
Obtaining funding for your small-to-medium business can help you survive tough times or take your enterprise to the next level.
Juggling all the steps you have to take to obtain a loan can be stressful and take up valuable time and resources!
Taking time out from your business to do an analysis of your business needs and research your lending options is only part of the process. Once you find a lender you can work with, you need to negotiate a deal with them that works for you over time and understand all the terms and conditions required over the term of the loan.
Working with a Mortgage Broker
Like most of the tasks in your business, if you can’t do them yourself, find someone who’s an expert at them. Brokers create a bridge between you and the lending world. Their role has them matching business owners with business lenders year-round. They know the best lender to engage for your purposes, so you achieve your important goals.