3 ways to borrow 100%
Do you want to buy a commercial property for your business or need business finance but don’t want to dip into your cash flow?
You may be able to get a 100% commercial loan with a combination of equity in an existing residential property that you own, a guarantor or your own business assets including client bookd and equipment.
A mortgage broker can help you put together an application that makes sense to the bank so you can get the business loan you need without having to pay a deposit!
Remember, you can actually use a combination of all three types of security to borrow up to 100% of the commercial property value.
This can often be complex and time-consuming when it comes to applying with the bank but a mortgage broker can make it really easy.
We can properly assess your asset position, get a good idea of the value of your business, and come back with an indicative funding approval for a 100% commercial loan.
Call 1300 889 743 or fill in our online enquiry form to speak with one of our specialist mortgage brokers to find out if we can make this happen!
The most straightforward way to borrow 100% of the commercial property value is to use existing equity in a property that you own as security for the loan.
If you’re looking to finance the purchase of a commercial property or you need finance to kick-start your new venture, you can borrow up to 80% of the property value in equity for the purchase.
If you’re already in business and you own your business premises (freehold), you can actually borrow against your property for any working capital or equipment finance that you need.
In some cases, the bank may not accept it at all.
- Pros: Using your own property as security is the simplest and least complex way to qualify for a 100% commercial loan. The bank will be more likely to go along with it as well!
- Cons: You will tie up equity in your property that you could potentially use to fund a small business purchase or to buy an investment property.
If you don’t want to tie up the equity in your property with a commercial loan, you can either ask your parents, a friend or a business partner to act as guarantor for your loan.
Basically, instead of using your property as security, your guarantor can use their property instead.
How much equity can they put up as security?
Your guarantor can provide up to 80% of their property value as equity or up to 60-70% if they’re using a commercial property.
- Pros: You can free up your equity and invest it back into the business as cash flow if you ever need extra funds in the coffers.
- Cons: The guarantor will be liable to pay back your loan should you default on your mortgage repayments. When it comes to commercial property guarantor loans, the guarantor will only be liable to pay back around 20-40% of the loan amount. However, when it comes to business loans (which would otherwise be unsecured), the guarantee will stay in place until the business loan is paid off meaning the guarantor will be liable for the entire loan amount.
3: Business assets
Some lenders will actually do what is known as a balance sheet lend which is basically lending against the value in your business.
The assets that the lender will take as security includes trail books, equipment and vehicles, and even goodwill.
They generally won’t lend against the full value of these assets but will consider a percentage instead.
The bank will generally base the valuation of your business on your last 2 year’s balance sheets.
Trail books and client books
For accounting and legal practices, a couple of our lenders will allow you to borrow up to 60% of the gross fee income of the client books.
For rent rolls, you can also borrow up to 60% of the rent roll purchase price (or based on an independent valuation).
If you run a business where you use specific machinery, tools, devices or vehicles on a regular basis, you can actually borrow against the value of these assets in what is known as a buy and leaseback.
How does it work?
Let’s say you bought an earthmover for your engineering business outright and it’s now 2-3 years old.
You can actually sell the asset to the bank and they will then lease it back to you so you can continue using it exclusively for your business.
Essentially, you’re freeing up the capital that’s tied up in the fixed asset which gives you more cash flow for your business.
Just be aware that with this type of equipment finance, you miss out on the depreciation and tax benefits since you’re no longer the owner of the asset.
As a general rule, banks will do a leaseback lend if the equipment or vehicle is no more than 6 years old.
When it comes to equipment like cranes and earthmoving machines, they still hold a lot of value even after this 6-year period which means banks may still consider taking it as a security.
Goodwill is often difficult to calculate but a good accountant will able to do this when it comes time to do your balance sheets.
How much goodwill you can use as equity really depends on the overall strength of the business.
Can I still get a good interest rate?
We can help you qualify for the same commercial interest rates as if you borrowing up to 70-80% of the property value.
You can even qualify for the same loan terms.
Call 1300 889 743 or complete our free assessment form today to discover if you qualify for a 100% commercial loan.