I had coffee with a banker the other day to discuss his ‘appetite’ for a Goodwill Loan for one of my Radiologist clients who is negotiating the purchase of shares in an established Medical Imaging business. He very clearly identified the cycle that all banks follow, although they’re rarely in sync.
The banks shift back and forth between loose and tight credit policies. His bank is currently in a tightening phase for Goodwill Loans due to a growing number of bad and doubtful debts, mainly among Dentists. It reminded me of my experience at GE Healthcare where the ‘pendulum’ swung back and forth between a focus on market share and a focus on margin.
Monitoring the banks’ fluctuating appetites for the various asset classes is one of the core competencies of a good finance broker. So, save yourself a lot of time and hassle by engaging Sooner Solutions to source the right facility and lender for Medical Equipment Finance, Commercial or Residential Mortgages, Loans for Motor Vehicles, and Goodwill Loans.
I’m never too busy to be a resource for someone you care about. So, if you or someone you know needs dough, give me a go.
… as you can see below, the 90-day and 5-year swap rates are slightly higher. Some of my clients expect a decline in the Cash Rate will mean a lower rate for their Medical Equipment and other Finance. But, the banks set their fixed rates for fixed term loans based on their costs from week-to-week. The RBA Cash Rate is not part of those calculations.
… to finance or refinance property. Fixed Rates of under 5% have got to be attractive for those with a one to two year time frame. I just wish my fixed rate was closer to the end of its term, because I’d fix now for five years or longer.
The Bank Bill rates for 90-days and five years have barely moved over the last three months. Both are in the mid-threes. To the technical analysts among us, the chart appears to be bottoming out, and the next move is likely to be up.
Therefore, now is a good time to lock in a rate for Asset Finance and/or a fixed rate for Property Finance. We can get a three-year fixed rate for property that’s actually less than a heavily discounted variable rate. This unusual condition may also be a sign that the downward trend is coming to an end.
It’s not enough to be able to easily repay a loan. It’s not enough to pay on time. It’s not enough to have a high net worth. And, it’s not enough to have a position of respect within the community. For a smooth approval process, it’s all about your transparency and ability to document any and all aspects of your finances. That’s the only way to satisfy the lenders’ need to create a ‘Perfect Loan File’, according to Mark Greene in a recent article in Forbes. The meltdown in the real estate market in the U.S. was/is, of course, much worse than here, but the attitude of the banks is the same. If they can’t tick every box on their credit matrix on the first pass, the approval of our application will be slow at best.
So, the way forward is to accept the often redundant documentation requests, remembering that when we were kids, one of our parents’ favourite replies to “Why?” was “Because I said so.”
So, what’s the perfect loan? Well, it’s one that (a) pays back the lender and (b) pays back the lender on time. But, underwriting the perfect loan is not the goal that lenders aspire to today.
The real goal is the Perfect Loan File.
The Reserve Bank’s rate increases don’t affect those with Finance already in place for Medical Equipment, because asset finance is based on a fixed rate over a fixed term. But, those of you who have variable or floating facilities for other needs, such as real estate, are now incurring increased costs. Capped facilities are also affected, unless the cap is low, which is unlikely. So, what is the real impact on your cash flow?
For each increase of 25 points, you’ll pay $100-200 per month more for every $1,000,000 financed. That may not seem a lot, but if you’re of the opinion that rates will continue to rise, as are most of the ‘pundits’, you may want to consider fixing now.
While Medical Equipment Finance is our primary focus, we have found a non-bank source of funds for Commercial Property Finance. The rates, terms, and conditions are miles better than our local institutions, and interest in this product/service is strong. Equipment can be financed with this source, but it must be bundled with a significant commercial property facility, preferably over $5MM.
Owners and Developers of Medical Centres, Day Surgeries, and Private Hospitals are among those who could save big bucks and avoid the restrictive conditions imposed by traditional funding sources.