Page 74 - Smart Money

Smart Money

There is no such thing as a standard rate in commercial finance, so going
to one bank will limit your options to the product and policy of that one
bank and you may not get the best deal.

Commercial finance is done at ‘rate for risk’. If you go to a bank that
likes development finance, they might offer you an interest rate of 6%,
whereas another bank that doesn’t like it might offer you 8%. If you
don’t use a broker and you approach the bank on your own, you are not
going to know that.

Key Point

The big diff erence in commercial lending is that it is rate for risk, and
all the banks will rate for risk differently. Commercial fi nance applies

to anything commercial – buying a property, building a property,
development – anything that is in the business space falls under these
legalities.

Cash flow in business is a really big thing. You have to understand that the
bank’s advice may be biased. One bank might only lend you 65% against
the type of security, so the approval will come for 65%. However, there
may be other banks that will lend up to 80% against that same security,
which means that your cash flow is not killed by having to put in 35%
when you could have put in just 20%. The banks aren’t going to tell you
what the other banks are doing at the time.

The bank makes the final decision. You should consult a broker to get
more control of your own situation and make sure you are getting the
best deal. You can make a better decision by talking to a broker, because
they can help you make an educated decision on which bank to use.

Keeping business and personal interests separate is really
important. If you’ve got personal security, try not to tie that up
with your business. Try and keep it all totally separate if you can.

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