Business Loans in Adelaide

Business Loans are a form of long term funding and can be utilised to fund various business purposes including:

  • the purchase of an existing business
  • Starting up a new business
  • Expanding your existing business
  • Construction of business premises / facilities (eg a manufacturing plant or industrial workshop)
  • Purchasing occupied premises
  • Management buy-outs

Business Loans are flexible facilities that can be structured to suit your cash flow requirements. Business Loans generally have terms of 1 to 5 years with the interest rate often affected by the loan term.

Business Loans can be secured by various assets including residential property, commercial property, cash, licenses, leases, franchises and other business assets.

Those loans secured by residential property are commonly known as Business Mortgage Loans and have favourable lending terms similar to home loans. These include low interest rates, longer loan terms (up to 30 years), interest off-set accounts, higher Loan to Valuation ratios (up to 80% of the value of the property) and less restrictive covenants.

Those loans secured by commercial property will generally have a term of 1 to 5 years with repayments structured over a notional longer term depending on the type and nature of business. A typical bank’s preferred maximum Loan to Valuation Ratio on commercial property is 65%, however some lenders will lend up to 70% for the right property and customer. Stronger businesses can gear even higher by including a portion of the loan secured against the value of the business assets and income.

Business Loans secured against the value of licenses and leaseholds tend to be quite specialised with varying loan structures and covenants. Some examples of these types of securities include taxi plates, pharmacy licenses / leaseholds, hotel leaseholds and fishing licenses. Some of these assets are quite restrictive and difficult to borrow against, for example banks will typically lend 40% to 60% against the value of a hotel license, depending on the quality of the business and its location. Most lenders will also include a number of restrictive covenants which need to be measured and met on a regular basis. On the other side of the coin, banks are far more liberal with what they will lend against a Pharmacy licenses / leasehold, with the key industry lenders generally lending up to 80% of the value of the leasehold. Due to the specialised nature of the industry, these loans will also include a number of specialised and restrictive covenants which will be measured regularly by the lender.

For established businesses with strong cash flow, lenders will consider lending against the value of the business on a “stand alone” basis. This is commonly known as “unsecured” lending. As a rule of thumb, businesses can borrow a certain multiple of their operating profit or “EBITDA”. The multiple of operating profit businesses can borrow will depend on their industry and specific business. Different industries may have different benchmark borrowing levels depending on factors such as stability of cash flow, strength and direction of the particular industry and required capital investment.

As you can see, business borrowing is very diverse and can be very complicated with a “mine field” of different issues to consider. By engaging Samuel Finance to assist with your business borrowings, we can focus on targeting the lenders who best service your particular industry and business type and then negotiate the best possible borrowing terms for you and your business.