Interest Rates & Borrowing Requirements

Australian interest rates were at a historical low for many months. This was part of a worldwide phenomenon as rates were progressively "de risked" and more recently to pump up the economy when Covid hit. Australian banks still borrow a large percentage (about 30%) of the funds they lend out from overseas sources. This makes our economy and interest rates very susceptible to the impact of events overseas.

In 2022 we have seen a number of shocks such as the Russo - Ukraine war, the collapse of the Chinese real estate market, and possibly their banking system, supply chain shortages, increased oil prices, and our own real estate prices rising significantly. The net impact has been twofold a) significantly increased financial risk & b) inflation rising to 1990s levels. The RBA has put the brakes on.

The long-term average variable residential home loan rate in Australia has been 6.03% per annum.

Business loan rates for SMEs with residential security have traditionally been 1% to 3% above the home loan rate. Loans that aren't secured by real estate are perceived to carry more risk and rates are higher based on the lenders' assessment of the risk. "Short term "unsecured" business loans are high risk and rates are higher.

It's likely that there are more rate rises to come, the economy will slow dramatically, and things are not going to look up in the short term.

Comparing lending products purely on the basis of interest rate can be very misleading. The tables below show the indicative pricing, and credit guidelines for various categories of business loans. Both rates and guidelines for business loans vary immensely depending on a lenders appetite for risk, speed to settle and security.

Residential Rates - Indicative - Non business purposes

The interest rates shown are indicative only from a composite group of lenders for a loan of $500,000 with a Loan to Valuation Ratio (LVR) of 80% over a nominal term of 30 years and are subject to lenders fees, terms and conditions. Loans are from a number of lenders. Rates, fees and guidelines are subject to frequent change without notice and should always be confirmed before application.

Commercial Property - Purchase, refinance or business purposes

Criteria	Full Doc	Lo Doc	Lease Doc	Short Tem /Caveat
Amount of Loan	$500,000 plus
Maximum Loan to Valuation	to 80% dependent on lender guidelines	to 75%	to 70%	to 60% - possibly higher
Term of Loan	to 30 years	to 30 years	to 30 years	1 - 12 months
Indicative Interest Rate	6.90% plus	5.00% plus	7.55% plus	8.25% - 25% plus
Indicative Lenders Fees	0.5%-1.00%%	8.50% plus	1.00% - 3.50%	1.00% - 5.50%
Indicative 30 days Commercial Bill Reference Rate	5.75%
Indicative Requirements
	2 years financial Statements	Profitability Statement	Statement of capacity to pay	Statement of capacity to pay
	6 months loan statements	Accountant Letter	A & L Statement borrowers	Valuation of Security
	2 years business tax returns	ATO Portal Statements	6 months loan statements	A & L Statement
	2 years business tax returns	A & L Statement - borrowers	Valuation of Security	Exit Strategy essential
	ATO portal statements	6 months loan statements	Copy of Lease(s)	See cautions ***
	Tax Assessment Notices	Valuation of Security	Full Application
	Full Application	Full Application
	Valuation of Security
Time Frames	Allow 30 - 60 days	Allow 30 - 60 days	Allow 30 days	2-5 days

Unsecured business loans

Criteria	Full Doc	Lo Doc	No Doc	Credit Impaired / Opportunity
Amount of Loan	$10,000 - $500,000	$10,000 - $500,000	$10,000 - $500,000	$10,000 - $500,000
Maximum Loan to Valuation	N/A	N/A	N/A	N/A
Term of Loan	6 - 60 months	6 months - 24 months	12 months - 36 months	1 - 12 months
Indicative Interest Rate per annum	9.00% - 27%	20% - 40%	30% - 40%	30% - 50%
Indicative Lenders Fees	0% - 6%	0% - 6%	0% - 6%	0% - 6%
Indicative Requirements
	Min 6 months trading	Min 6 months trading	Min 6 months trading	Min 6 months trading
	Profitable business	Profitable business	Profitable business	Profitable business
	Clear Credit File	Clear Credit File	Clear Credit File	Credit issues accepted
	up to 2 years bank statements	6 months bank statements	6 months bank statements	6 months bank statements
	ATO portal statements	A & L statement borrowers	A & L statement borrowers	A & L statement borrowers
	2 years business tax returns			ATO debts accepted
	2 years business tax returns			Must have exit strategy***
	Valuation of Security
Time Frames	1-5 days	1-5 days	1-5 days	1 - 5 days

Invoice/Debtor Finance

If you sell business to business invoice discounting offers a highly flexible and cost-effective alternative that can "grow" with your sales and is not tied to the value of your real estate.

Criteria	Finance all Debtor Ledger	Specific Invoices Only	Supply Chain Finance
Amount of Loan	$15,000 plus	$15,000 plus	$15,000 plus
Maximum Advance	to 80% of ledger	to 80% of invoice value	to 80% of invoice value
Term of Loan	Ongoing	90 - 120 days	90 - 120 days
Indicative Interest Rate	9.00% - 12% per annum	0.9% - 5% per 30 days	0.9% - 5% per 30 days
Indicative Lenders Fees	0% - 6%	0.5% - 1.1%	0.5% - 1.1%
Indicative Requirements
	Min 6 months trading	Min 6 months trading	Min 6 months trading
	Profitable business	Profitable business	Profitable business
	Minimum annual sales	Minimum annual sales	Minimum annual sales
	Quality business debtors	Quality business debtors	Quality business debtors
	Copies of Issued Invoices	Copies of Issued Invoices	Copies of Issued Invoices
	Copy Debtors Ledger	Copy Debtors Ledger	Copy Debtors Ledger
	Copy creditors Ledger	Copy creditors Ledger	Copy creditors Ledger
	ATO Portal Statement	6 months bank statements
	2 years business tax returns	ATO Portal Statement
	2 years business tax returns
	A & L statement borrowers	A & L statement borrowers	A & L statement borrowers
Time Frames	14 to 60 days	1 - 5 days	1 - 5 days