Page 1 of 1

Re: What is a bank bill loan?

Posted: Mon Feb 16, 2015 10:53 am
by Otto Dargan
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

Re: What is a bank bill loan?

Posted: Mon Feb 16, 2015 5:05 pm
by Otto Dargan
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

Re: What is a bank bill loan?

Posted: Wed May 06, 2015 10:10 am
by Otto Dargan
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