Recent Banking Code of Practice changes on 1 July 2019 have resulted in lengthy delays to access to Commercial Lending funding for business clients.
What are the changes?
Now when the Banks are considering a Commercial Lending application they are looking more closely and in more detail at the following considerations:
· Is the person providing the guarantee considered suitable, according to the Bank's lending criteria;
· Is the person providing the guarantee considered to be a vulnerable guarantor; and
· Is the person providing the guarantee obtaining a substantial benefit from providing that guarantee?
Whilst the above points have always been considered in any loan application, it is now mandatory that the Banks can demonstrate and verify that careful consideration has been given, prior to taking and accepting guarantees.
In conjunction with the above considerations, the Banks are also carefully reviewing the ability of the business to repay the loan, by, in most cases, completing a 3-way detailed Income Servicing Test. This Income Servicing Test is not limited to the borrowing entity but extends to other associated entities and the business owner's household for personal commitments
All of this is leading to extended timeframes for access to lending for business clients.
Four Tips on what you can do to prepare well for your application's assessment:
| 1. |
Give yourself sufficient time for your application to be considered by the Bank – we recommend you allow 8 to 10 weeks for business loan applications and 2 to 3 weeks for Home Loan applications; |
| 2. |
Make sure you are well prepared and ready to borrow by having all Business and Personal Income Tax Returns completed and up to date; |
| 3. |
Ensure you have access to all the relevant Loan and Bank statements for your existing account and make sure these are available to the Bank or Lender as soon as practically possible; and
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| 4. | Ensure you understand your personal/household living expenses (income/expenditure) – and can verify them to the Bank's satisfaction. |
Perrier Ryan Financial Services understands these changes and what is required by Banks and Lenders in the current environment. Call Andrew Forsyth for assistance with your Lending requirements – he'll help you prepare for your loan application to ensure your readiness, support you and provide timely advice through the entire process. Call him in the office on 3391 7566.
