Did you know that there’s a cheaper way to borrow for your business or commercial property?
Many businesses don’t know that a business loan isn’t the only option out there. If you’re in the big leagues then the banks may give you access to wholesale pricing.
What are bank bill facilities?
A bank bill facility is a loan that is linked to the bank’s cost of funds. Specifically, your loan will have a margin above the Bank Bill Swap Bid Rate (BBSY) interest rate at which the bank borrows money.
Your customer margin is determined by the size of your loan and the overall risk of your application. Your interest rate is rolled over every 30, 60, 90 or 180 days and at each rollover your interest rate is reset to the current cost of funds plus your margin.
Have a look at our commercial loan interest rates page for the best available customer margins from our panel of lenders.
Who are they suitable for?
Bank bill loans are perfect for large commercial property investors or medium to large businesses. If you are borrowing $5 million or above then this may be the best type of facility for you.
However, it is possible to get a bank bill loan for loans as small as $2 million.
Which lender is the cheapest? Our commercial brokers can normally get you a better deal than you can get going direct to a major bank. Give us a call on 1300 889 743 or fill in our free assessment form.
Why are they cheaper?
With a normal commercial loan your loan is still funded in the same way behind the scenes except the bank takes the risk of fluctuations in the cost of funds on the money market.
With a bank bill facility you are taking the risk instead of the bank. If the money market has a spike in interest rates, your bottom line is affected not the banks.
Effectively, you are going wholesale and the bank is charging you a margin for them giving you access to this funding, managing the loan and taking the risk of default.
In addition to this, features such as offset accounts aren’t available. They’re no-frills loans.
How can you get the best deal?
It comes down to understanding your risk as a borrower and choosing a lender that considers you to be a low risk.
At the moment, some banks are pricing aggressively to win market share. We’re well aware of which banks want your business and can negotiate a low interest rate for you.
Aside from the risk of your loan, the two biggest factors that impact your pricing are:
- Your loan size: Larger loans will get lower margins.
- Your security position: The lower your LVR and the better the security that you offer, the lower your margin.
Give us a call on 1300 889 743 or fill in our free assessment form to find out what we can do for you.
Managing interest rate risk
You can choose to have a fixed, floating or capped interest rate to manage the risks associated with your commercial bill loan.
Consider the needs of your business and whether a movement in interest rates will significantly affect you. If so, locking in a fixed rate will give you the peace of mind that macro-economic conditions can’t put you out of business.
Are they more complex?
Some lenders with older core banking systems overcomplicate what should be a very simple transaction.
One of our lenders charges two payments, one for the cost of funds and the other for their customer margin. One is payable three monthly in advance and the other monthly in advance. This causes a lot of confusion.
Thankfully most other lenders keep it simple and invoice you monthly in advance or arrears for the full interest payment.
What is a rollover?
When your 30, 60 or 90 day term has ended your facility is rolled over to the new BBSY rate at that time plus your margin. Effectively your old loan is repaid by a new facility which the bank has sourced on the money market.
It’s all quite simple. Just be aware that your interest rate can change and that some lenders will charge you a rollover fee.
Apply for a bank bill loan
Don’t just accept what your bank has offered you! You’d be surprised what we can do by negotiating with the right banks!