Hi Everyone / Steve
I have read you say that ideally you should borrow in name of company as trustee (for various reasons & I agree). Security is mortgage over the IP & Directors Guarantee. I understand that from a security point of view the Bank would be happy with the guarantee, but what about serviceability? If the Company (ATF) is a separate entity, and it is the entity borrowing, how can it demonstrate serviceability for the Bank to lend it money?
I know that you have said in the past that the personal guarantee is sufficient, but I have asked my bank and they have said that "the Company is who is borrowing, and the company needs to demonstrate serviceability" and "there are ways it can be done (company being paid a wage to manage the property?) but we can't tell you what they are, and anyway it isnt usual".
Where do I go from here?
Len
The banks rely on the incomes of the guarantors, usually the directors of the company. If the company has any income such as rent from exisiting properties or the property being purchased then this can be taken into account too.
Many banks will not lend to trading companies because of the risks they attract and you should never buy in a company that is running a business.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
This is a common structure of ABC Pty Ltd ATF The ABC Family Trust with ABC Pty Ltd, Mr ABC and Mrs ABC as guarantor. A lot of people will set up a Special Purpose Vehicle (SPV) for the purpose of acquiring the property etc that may specifically deal with the property investments.
It is definately an option you could nut out with your Accountant. A lot of lenders have no issues, but some of the banks do, so do your homework. It is as Terry says you can use the income from the guarantor to service the debts. You can also use addbacks such as loan interest etc linked to the company if it has other property interests or you are consolidating debts from a business.
I hope this helps.
L.A
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