Hello,
I am a first time borrower about to seek a business loan on a small motel in Tassie, freehold.
Have not borrowed from a bank in more than 20 years so I'm way out of touch with everything in this area.
Basics:
Loan required approx $500-$600k
Cash on hand: $350k
Motel is in top condition (under 15 years old) and netting around $120k per year.
I have not yet even gone to an accountant yet to run things past them as I am waiting for full financials to become available later this week.
Specifically what will the banks look at besides the figures?
Do the above basic figures sound reasonable to obtain a loan?
What other info will the bank require to guage if we can service the loan.
We do have other property we own outright but there is no way we would use this as part of any collateral on any bank loan…its a nest egg the bank needs not to know about.
The return income from the motel will be our sole income for my wife and I…We have just finished up at our respective jobs in December and have been looking for more than 18 months for a motel that suits our needs…the one we found is perfect, small and requires no staff.
Little concerned about the tourism market in Tassie declining which we have allowed for but other than that the motel is very sound in structure, fitout etc.
Any feedback is most welcome.
I would anticipate approaching a broker over the next two months after further negotiations.
The motel is not listed with anyone, its a private sale.
Cheers Mark
Hi Mark
Ok first look the basic numbers appear ok in regards to lvr (although of course you havent mentioned the actual purchase price but will assume it circa $850K) and you asset backing is adequate.
Whilst you may not wish to offer your existing residence as security you will still need to disclose this as an Asset on the application form so any potential lender will know about it. I assume this property will be rented out and you will reside in the Motel so the rental income will aid serviceability.
Lenders look at a variety factors when it comes to Commercial lending but your experience albeit not in the Motel industry will be important. The net income quoted i assume is before any salaries are taken out but again fairly meaningless as without the actual Audited Accounts could be based on anything from Nil to 100% current borrowings.
Only issue i can see with certain lenders is the locality of the security as Motel lending in treated as specialised security by many lenders and Tassie is not high up on the list. Course many others would have no issue.
Not a bad starting point but additional information needed to advise further.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for the feedback Richard.
The property we own is not under my wifes or my name…..there is absolutely no way any finance outlet will be sinking their teeth into it.
Without a doubt they will want to use the property as collateral if they offer a loan.
I'll raise the funds another way if we would be forced to use the property in any way……the property is for our kids to benefit from.
Locality of the motel is very good, be it that its in Tassie itself may detract a little for some lenders, its on a major tourist route and a rapidly expanding area.
Sale price is yet to be negotiated but the seller has indicated a price they are seeking.
Until all the accounting figures have been presented and checked I wont discuss any offer with them, pretty pointless really.
Will do the basics and may come back to you if it looks inviting and see where it leads.
Thanks again,
M
Hi Mark
Wasnt suggesting you offer any lender security over your home merely pointing out that you would want to disclose it on your appication as it will add weight to the deal.
Always a good idea to look at the last 2 Years actual Tax Returns as well as the last quarters BAS.
This will give you more of an idea as to what the real numbers are.
Good luck in your negotiations.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Just received the figures late this arvo…they are not what was expected or advised verbally.
The net is very poor for the business so I will need to rethink the deal.
Unless the seller drops their price by $250k they will never sell the business…no accountant would take their figures as really sound I feel.
Still i will do the exercise and throw them a lifeline if they are serious about selling and make a very low offer…you just never know.
I'll keep in touch if it advances further.
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