—-How much can I borrow?

Excellent question!

If you are buying a business in the accommodation industry then this is a crucial aspect of what size —————business you can afford. The answer, however is dependant on a number of variables. The amount will ———vary considerably between different people even on the same business.

Some of the variables will be:

* Type and location of business you are buying. How well established is it OR is it a new operation. Does it —— have a star rating? How many rooms/units are included? Is it freehold or leasehold? For leasehold, ————-what are the lease terms and conditions? For management rights, what are the terms of the ———————-management agreement? What is the condition of the property?

* Financial information available on the subject business. This will need to demonstrate that the profitability ——- is sufficient to demonstrate that all loans can be serviced and also that the ratio of profit to price is in ——- line with industry norms.

* What cash or equity in property you may be putting into the purchase?

* What other security you may be able to provide?

* Your working background. Does the purchaser have industry or similar experience?

* Your credit history and current level of borrowings. All borrowers will be expected to have a clear credit ———- history and that all current and proposed loans can be adequately serviced from the income of the —————business plus any continuing external income sources

———————————————————————————————————————————————————————

——-We would need to find out all of these items to come up with an educated estimate of your borrowing power for a particular business type. We can then assess what can be lent against any currently owned assets being put forward as well as the business being purchased. Give us a call or an email and this can be assessed very quickly.

A common area overlooked by new business purchasers is the allowance for all the relevant business purchase costs. These will include stamp duties (amount varies in different states), legal costs, due diligence costs, initial business insurances, business/property valuation costs, borrowing costs, working capital, rent in advance, rental bonds, any franchise/marketing group fees and training costs. As a rough rule of thumb, you should allow at least 10% on top of the purchase price to cover these.  Should you need to spend any money on the business in the initial 6 months, this amount should also be allowed for on top.  Never underestimate the amount that should be provided for working capital. We would recommend that the bare minimum of $10,000 be available (doesn't matter whether it is in the bank, an overdraft facility or even cash under the bed as long as you have some backstop funds to cover an emergency).

As long as there is sufficient security available and the business income is sufficient, it can be possible to borrow the full purchase price plus relevant purchase costs. However, it may be prudent to consider putting in cash to reduce your exposure.

Possible Lending maximum Percentages:

           Freehold Motels————————-60% to 75%

           Leasehold Motels————————30% to 50%

           Management Rights——————-40% to 70%

           Residential property——————-80%

           Other commercial property———60% to 70%

           Cash on deposit————————-95% to 100%

Actual percentage applied will vary as our panel lenders have a variety of loan terms and conditions. Our aim will be to obtain the best possible amount against the property(s) being offered as security. Different loan terms and conditions can apply and key success factors or industry benchmarks may be applicable. Lenders will require a formal independent valuation of the offered security in every case. 

           Once we work out what can be done, we can then propose the best mix of loan facilities to suit the requirement.  For most situations, this will be a suite of facilities designed to match the business cashflow and deliver the lowest repayments in order to provide flexibility. Of course, we undertake a review of applicable interest rates, fees and loan terms to ensure that you are being provided with competitively priced facilities and terms that will keep you relaxed. As there are such a wide range of loan products, it is not feasible to show interest rates on this site. We would look to tailor loan products to individual requirements.

To contact us:

—Phone:—(02) 6368 7161

—Fax:——-(02) 8208 7379

—Email:—-info@motelfinance.com.au