What is a bank bill loan?

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Murri
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Joined: Tue Mar 17, 2015 7:48 pm

What is a bank bill loan?

Postby Murri » Sun Feb 15, 2015 8:08 am

Hi there! I was thinking of getting a commercial loan to finance the purchase of a property for business purposes. While researching a few things, I found out that I could make use of a bank bill facility, which is supposed to be a better deal over a standard commercial loan.

I don’t know much about this facility so I asked a friend if he had any idea or experience with it. He directed me towards this forum and suggested me to ask my queries here. So can anyone please explain to me what a bank bill facility actually is, and its effect on a normal commercial loan?

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Otto Dargan
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Re: What is a bank bill loan?

Postby Otto Dargan » Mon Feb 16, 2015 10:53 am

Hello Murri. Welcome to the forums.

Here is what you need to know about a bank bill facility - this is a type of loan that is linked to the cost of funds of the lender. In clearer terms, your loan will have a margin that stands above the Bank Bill Swap Bid Rate (BBSY) at which the lender borrows money.

The size of your loan and the overall risk of your application are taken into consideration when determining your customer margin. The interest rate that you get is rolled over every 30, 60, 90, and 180 days. When rolled over, your interest rate changes back to the current cost of funds plus your margin.

It is recommended that you check out the best available customer margins from a group of different lenders before you try applying for this loan.

If you are operating a medium to large business then this may be a great option for you. Generally, this facility is significantly beneficial if you are borrowing $5 million or more. However, please note that you may be able to get a bank bill loan for an amount as small as $2 million.

The major difference between a normal commercial loan and one with a bank bill facility is that in the normal one, the lender takes the risk of fluctuations in the cost of funds on the money market.

However, if you have a bank bill facility, then you are taking the risk instead of the lender. In effect, this is as if you are going wholesale. The lender charges you a margin for giving you access to this funding, managing the loan, and taking the risk of default.

Cheers,
Otto
Otto Dargan
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Murri
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Joined: Tue Mar 17, 2015 7:48 pm

Re: What is a bank bill loan?

Postby Murri » Mon Feb 16, 2015 1:40 pm

That sounds like a really good deal to me. I’m planning on borrowing at least $2 million, could possibly be more. It’s good to hear that the facility could be very beneficial to me. Can you please clarify what you mean by interest rate ‘roll over’?

Also, I’d appreciate it if you could give me a few tips to make this into a better deal.

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Otto Dargan
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Re: What is a bank bill loan?

Postby Otto Dargan » Mon Feb 16, 2015 5:05 pm

Hi Murri,

At the end of the 30, 60, or 90 day term, your facility is rolled over to the new BBSY rate at that time plus your margin. This means that your old loan will be repaid by a new facility which the lenders has sourced on the money market.

It is not as complex as it may seem. You must simply be aware that your interest rate may change, and that some lenders may charge you a rollover fee.

If you want to get a better deal, you may consider the two biggest factors that impact your pricing aside from the risk of your loan. They are:
  • Loan size - If you have a large loan size then you may not get a high margin. Small loan sizes typically get higher margins.
  • Security position - If you have a lower LVR and offer a good security property then you may get a lower margin.
For more information regarding all of this, you can have a look at our website. If you want to discuss your situation and loan needs with one of our experts then you can call us on 1300 889 743 or fill in our free assessment form.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Murri
Posts: 8
Joined: Tue Mar 17, 2015 7:48 pm

Re: What is a bank bill loan?

Postby Murri » Tue Feb 17, 2015 11:39 am

Thanks a bunch, Otto! I’m really impressed with this forum as well as your website. They’ve already helped me out a lot. I’ll be calling your office by the end of the month to discuss things in detail. Have a good day :)

homer
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Joined: Mon Mar 16, 2015 6:23 pm

Re: What is a bank bill loan?

Postby homer » Tue May 05, 2015 4:16 pm

Hello,

I’ll have taken out a commercial loan in the next couple of weeks and I want to know what features would be beneficial to me. A bank bill facility seems interesting but how can I decide on what’s good for me?

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Otto Dargan
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Re: What is a bank bill loan?

Postby Otto Dargan » Wed May 06, 2015 10:10 am

Hi homer,

If you cannot decide on what commercial loan features to get then you need to immediately define what you actually want as a commercial property investor or business owner.

If you want:
  • Lower repayments then you may want to have a longer loan term or an interest only period.
  • A smaller deposit then you may look for a higher LVR or an unsecured overdraft.
  • To make seasonal repayments then it is usually best to ask for an unsecured overdraft.
  • A reduced rate for a large loan then you may benefit from a bank bill facility.
  • To make additional repayments then you may want a variable rate loan.
You can have a look at our website or give us a call to get a better understanding of this.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

homer
Posts: 4
Joined: Mon Mar 16, 2015 6:23 pm

Re: What is a bank bill loan?

Postby homer » Thu May 07, 2015 1:13 pm

You and your website have been of great help to me. Thank you very much, Otto! You can expect a call by the end of the day. Cheers.


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