- Interest rates: Variable, fixed, split and bank bill swap rates (BBSY) available.
- Additional repayments: For variable business loans only.
- Redraw facility
- 100% offset account
For example, banks usually restrict the Loan to Value Ratio (LVR) of commercial loans up to $1,000,000 to 80% of the property.
Loans up to $5,000,000 typically have LVRs capped at 70%. In this case, your guarantor would need to put up 30-35% of the property value unless you were able to put in some of your own funds.
When does it make sense to use a guarantor?
Finance to buy an existing business or to kick-start your own start-up will always require you to have your own funds or equity in a property that you own as security for the loan amount.
Typically, if you need a loan to fund the purchase of a freehold going concern, the commercial property itself can be taken as security for the loan amount.
However, you can use 60-70% of the property value as security when it comes to standard commercial properties like factories and warehouses.
The Loan to Value Ratio (LVR) for specialised commercial properties like a child care centre will be even less and may not even be accepted as security at all.
So, ultimately, you’ll need a security the remainder of the loan anyway and this where a business loan guarantor can help.
What are the alternatives to a guarantor business loan?
If you don’t have someone who can act as a guarantor for your business loan or you’re just not comfortable with the arrangement, there are other solutions available to you depending on the amount you need to borrow for your business.
The following solutions don’t require to have a guarantor or a residential property as security however you’d need to be a strong financial position and show that your business is in a healthy position:
- Debtor finance: Some lenders will allow you to borrow up to 90% of outstanding customer invoices if you’re a low risk borrower with strong business cash flow.
- Unsecured overdraft: At least one of our lenders offers unsecured overdrafts of up to $50,000.
- Equipment/motor vehicle finance: In this situation, you’re actually lending against the value of the equipment but you can actually get a preapproved limit of up to $100,000 just by providing an invoice of the equipment you’ve purchased.
Of course, if you need to borrow more for your business or you need money for start-up capital, your only other options are to save up a deposit or use a residential property you own, when it’s your home or an investment property, as “first party guarantee”.
What about a non-recourse business loan?
This is typically for business owners who don’t want to use a guarantor or https://rapidloan.net/payday-loans-ga/ their own property as security for a business loan.
This is typically only available for larger businesses with over $5 million in turnover and there are rules that apply to this type of lending.
Call us on 1300 889 743 or complete our free assessment form so we can take a thorough look into your situation and your needs in order find the right business loan solution for you.
Is there a limited guarantee in place?
Unlike a residential guarantor loan or even a commercial property guarantor, business loan guarantors are actually securing the entire business loan amount.
For example, when securing a residential property, the guarantor is only securing up to 20-25% of the property value and not the entire 100%.
Since the business loan is essentially unsecured and there is no existing value that the bank can “hang their hat on” so-to-speak, the guarantor has to secure the entire amount.