Finance - What are the banks doing?
Banks normally look at two years of financials to determine serviceability.
The RBA has a directive to banks to support business lending.
Finance is available, but there are hoops.
Business lending was always a tough gig prior to Covid-19, and never a simple process.
It’s achievable but a lot of information is now required.
Banks are now concerned about:
Has the industry been affected by COVID-19?
How have you addressed COVID-19?
Post COVID-19 what is your go-forward plan?
How has profitability been impacted by COVID-19?
What will the profitability be going forward?
They are looking for monthly figures and quarterly figures.
They also want current figures up to 2020, and that financials are consistent.
They will be wanting interim numbers for the current year.
Banks are keen to lend for specific industries, for example, Real Estate Agents with a 2.5% interest rate from Macquarie Bank.
For example, we have just worked with a real estate client to grow their rental roll by acquiring another agent that is in distress.
This is an opportunity for your business to grow via acquisition in this market.
Home loan and investment loan assessment criteria have tightened.
Now asking for information to validate serviceability, e.g. last three months payslips, industry, not JobKeeper dependent, you need to dispel the banks' concerns to repay.
Loans are now taking longer to get approved, so give yourself more time for getting pre-approval.
Valuers have at this stage not marked down properties values.
If your retiring before the length of the loan will need to have an investment/exit strategy.
Banks assess two years worth of financials, so be aware that this will be important when seeking finance.
So this year’s number will count and they will err on the side of being conservative.
If there is any chance you may need to borrow in the future, we need to ensure profits remain consistent and results may not be tax-driven.
My video on thriving post-COVID-19.