A barristers chambers commercial loan can help you finance the purchase of your very own solicitors chambers.
With strong lender relationships and expertise in assisting legal practitioners, a specialist mortgage broker can help you borrow the amount you need for the barristers chambers you want.
How to get approved for a barristers chambers commercial loan
Even though barristers and legal professionals are considered high net worth borrowers, barristers chambers are considered a higher risk compared to standard commercial properties.
That’s because you’re not actually buying a freehold or a lease to use as security, but rather, shares in the company that owns the barristers chambers.
The trick to getting your barristers chambers commercial loan approved comes down to choosing the right lender.
How much can I borrow?
You can borrow against the value of your practice!
- Borrow up to 60% of the value of the shares in the barristers chambers.
- Borrow up to 100% with the help of a guarantor.
- Maximum loan term for principal and interest repayment: 10 years
- Maximum loan term for interest only: 3 years (within overall 10 year term).
- No max loan limit: The amount you can borrow depends on the strength of your situation.
- No annual reviews required.
- Low doc options aren’t generally available.
- Significantly reduced commercial rates on offer by negotiation.
A specialist mortgage broker can help you set up a loan facility with a sharp interest rate that works for you.
Call 1300 889 743 or complete our online enquiry form today.
What can I use as security for the loan?
If you currently run a practice, some of our lenders can use up to 60% of the projected income of your practice based on a 12 month rolling basis.
Do you own a residential property?
If you earn over $150,000 and have equity in an existing property, you can actually borrow up 90% of the property value, compared to the typical 80%.
By using equity in an existing property, you can reduce the deposit you’ll need to complete the purchase.
What am I buying exactly?
Essentially, there is a higher risk with these types of loans because they’re not a standard property like buying an office or factory.
Banks aren’t conservative because the property itself is purpose-built but because these properties are owned and operated by Counsel’s Chambers Limited.
Counsel’s Chambers is the company that owns the freehold and leases out space or rooms to barristers by way of shares.
You and the other barristers occupying the premises are buying shares in the company and this is what the bank takes as security for the barristers chambers commercial loan.
It’s similar to buying shares in a company title except the price of shares are kept at what is considered to be “actual” market value rather than the overinflated values that affect the residential and wider commercial market.
How will banks assess my application?
Most banks will be looking at the following when assessing your barristers chambers commercial loan application:
- Average fees per partner (gross sales): More than $500,000.
- Profit per partner (net profit): At least $140,000.
- Client concentration: No client is to generate more than 10% of total revenue.
- Interest coverage ratio (ICR): At least 1.75x or 1.5x (with a property as security) earnings before interest and taxes (EBIT) to interest payments.
- Net profit margin (before partners salaries): At least 25%.
- Work-in-progress (WIP) days outstanding: Less than 120 days or 4 months. You may still be able to get approved but this situation is considered a higher risk so your Loan to Value Ratio (LVR) may be reduced or you may incur a higher interest rate.
- Debtor days outstanding: Less than 90 days or 3 months.
- Total cash lock-up (WIP + debtors): Less than 180 days or 5 months.
- Debt servicing ratio: Cash you have available to the debt amount is usually required to 1.2:1, which is very flexible compared to other commercial purchases which require 1.5:1.
Some lenders assess projected income on a rolling 12 month basis rather than the typical 2 years required for standard business loans!
Are there any other requirements?
Apart from valuing the business, the bank will generally want to see:
- Practitioner certification: This will be the certification from your State Law Society or Bar Association.
- Professional experience: 3 years.
- Net worth: No general requirements but it should match your age and experience as a practitioner.
- Business plan: This may be required if your business numbers don’t quite add up but you can show that you have the experience to run a successful practice.
Not all commercial lenders have the same requirements!
Complete our free assessment form today so we can run your business chambers commercial loan application past a business credit assessor.
We can provide an indicative funding approval really fast!
How can I get a good deal on the loan?
By presenting a strong case, with good financial evidence to the right lender, you not only put yourself in a good position to get your barristers chambers commercial loan approved but you could qualify for significant discounts as well.
Borrowing the amount you need for a modern barristers chambers in a great metro location is possible with the help of specialist mortgage broker.
You can also get heavily reduced commercial interest rates with a broker that has strong lender relationships and good negotiation skills.
Call us on 1300 889 743 or fill in our free assessment form and speak to an expert in barristers chambers commercial loans.
What are the benefits of owning a barristers chambers?
The reason why barristers buy shares in a chambers is to reduce costs and maximise profits.
The reason is that you’re sharing space with other legal practitioners.
It’s not for everyone but there can be many benefits in operating a practice in this manner.
Access to facilities and services
Depending on the licence you buy, your floor fees will cover the use of and access to:
- Conference or interview rooms.
- Telephone and computer facilities.
- A legal library.
- A receptionist.
- Cleaning and utility services.
- Kitchen, bathrooms and common areas.
You can get referral business
In the same way that fast food and retail chains tend to be situated in close proximity to each other, there is a good chance of generating referral business from being close to the other practitioners, as it were.
Reach out to other practitioners
You can develop relationships with other practitioners who may specialise in certain fields.
You may then reach an agreement for a referral commission or ask them if they can cover you when you’re on holiday.
This is often much cheaper than hiring a locum.
Appeals to practitioners at different career stages
The collegiate nature of the barristers chambers environment is great for sole practitioners who still want to practise independently, away from a partnership model, but still be in a position to discuss legal problems with other industry professionals.
Those starting their careers, particularly those aged 25 to 35, are drawn to the reduced overheads of a barristers chambers compared to renting space in an office building, not to mention the upfront costs of refurbishing a space to suit their practise needs.
There are also referral opportunities and the opportunity to seek out help and advice from solicitors with longer experience.
Solicitors chambers also attract former partners who became fed up with their old partnership model.
Partners can sometimes take sides, there can be unfair splitting of profits and former partners, particularly those in the latter years of their career, no longer want to be liable for the actions of their colleagues.
Do you want to buy a freehold property?
If you’re an investor and looking to purchase a freehold barristers chambers, chances are you’re likely going to struggle to find them in the classifieds.
These types of properties are tightly held by large firms or barristers chambers companies and it’s very rare that they are sold in any public manner.
What should I look for in the barristers chambers?
One of the first things you should consider is whether the premises will support your practice with good services.
Work out the approximate amount of space you require, visit commercial real estate agents and buyers agencies in the area where you want to set up.
For suburban or Category 1 areas, choose an area where you believe there is enough potential clients (residential and business) and avoid locations where there is an oversupply of solicitors.
It may be an advantage to have the property close to real estate agents, banks, building societies and court houses.
The Law Society of New South Wales can provide you with some great tips on what to look for and how best to go about setting up a barristers chambers.
Can I buy a barristers chambers in a trust?
Like doctors, barristers are not permitted by law to provide services under a company or trust structure.
However, you can still purchase the barristers chambers through your self-managed superannuation fund (SMSF) and then for that fund to lease it back to you.
You may be able to claim a tax deduction for the lease rental paid to the fund but it’s important you speak to your accountant before deciding how you would like to purchase the barristers chambers.
Do you need a barristers chambers commercial loan?
Are you a barrister, solicitor or other legal practitioner that needs finance to buy their own practice office?
Our mortgage brokers have commercial expertise and know how to get a barristers chambers commercial loan approved.
Call us on 1300 889 743 or complete our free assessment form and we can let you know how we can help you.