Banking Lending Australia

Borrowing in Todays Market

You have probably heard in the news, and from anyone who has any knowledge of the lending industry, that it is getting harder to borrow money for business loans and mortgages.

For the most part, this is true, but it is not impossible if you have the right knowledge under your belt, and you understand what the lenders are going to be looking for at this time.

The reason that the money flow is constricted is that the banks, quite simply, are reacting to the recently published Royal Commission findings. In fact, knowing that they were under intense scrutiny, and the findings for them might not be good, most lenders tightened up lending criteria some time back.

It remains to be seen what of the findings the government will implement, but it is unlikely to be easy on the lenders, although the government is tasked with the challenge of appropriate controls put in place, and restricting financial markets in Australia completely to the point where the current downturn can become longer lasting and more entrenched.

Back to what it means for you, and how do you get a loan across the line.

We know that lending criteria have tightened up and that lenders are looking only for the best highest qualifying loans to fund.

If you are going to go to a lender for finance, you should;

  • make sure your financials are up to date. If you have interims make sure you can justify the figures in there
  • make sure you have no missed or late payments on other loans, personal or business
  • check your loan to income ratio (and don’t forget the loan value is calculated on the maximum limit of the finance, not the outstanding balance)
  • check your loan to income ratio (and don’t forget the loan value is calculated on the maximum limit of the finance, not the outstanding balance)
  • be prepared to present your case for the finance. Don’t assume that a question asked by the lender is going to signify that they are looking for a reason to disapprove. More likely they are looking for reasons to approve the loan and need ample evidence to show the finance is good
  • don’t request more than you can comfortably repay
  • don’t request more than you actually need ‘just in case’. Do a workout, and create a business plan for an exact amount. This will be helpful

End of the day you will not know the exact criteria that the lender is working on, or why one lender is prepared to offer a loan when another is not based on the same circumstance and figures.

Don’t let this frustrate you. Reassess where you are at if you do not get the finance you want and decide if it is worthwhile applying elsewhere.

If all else fails, wait to see what the government does, and perhaps bide your time.

If you need to get the finance now there are other options, including private funding and alternative lenders. Speak to Willow and Oak to determine if these may be appropriate for you.

Most of all, listen to the advice of the professionals around you, finance broker, accountant and financial advisors. They are in the market daily and speaking to the people who actually have a grip on what is going on. Ultimately it is up to you if you take their advice, but it is worth paying attention to.