Type of Client: Self-Employed Business Owner
Type of Loan: Commercial Loan
Success Factors
We sold our client’s retail design experience – she had fitted out multiple Westfield food courts in her previous role. Her portfolio at Westfield centres presented very strongly with the lender.
Our client was well educated, and together with her partner, provided an extensive business plan for how they would run the café. The business plan demonstrated their strong commercial acumen.
The day-to-day operation of the café would be performed by our client’s partner, to allow her to continue to earn PAYG income.
Situation
Our client had a background in architecture, and was earning a regular professional PAYG income. Throughout her career, she had applied her expertise in retail concepts and design, having worked for Westfield Group, and then for a real estate investment trust fund. In addition to this, our client had a passion for food and hospitality.
An opportunity arose for our client to purchase a café in the CBD in Sydney, for $400K.
The day-to-day operation of the café would be carried out by our client’s partner, who also had worked at Westfield and had a long history in creative retail design. He had a passion in food catering and equipment.
Challenges
Although our client had a strong financial position with over $1.4M in net assets, her savings were not sufficient to complete the purchase. She required a loan for the full $400K.
This was also her first time as a business owner, café owner and operator. Her experience in design was not a straight sell to banks.
While our client with her partner had carefully considered the business plan for this purchase, the contract of sale was signed before securing finance approval.
Result
On assessing our client’s borrowing position, we found out she held two residential properties that were cross-collaterised. One of them had a significant capital gain, with a LVR of 30%. She was able to use her home equity to establish a commercial loan for the café purchase.
Her new loan was secured against both her home and the investment property, with an overall LVR of under 50%. We did this by un-crossing her loans.
We were able to achieve the lowest commercial rate in the market, with a 20-year loan-term, plus an offset facility. As a matter of fact, her commercial rate was lower than the residential rates she had been paying previously.
As a bonus, we helped our client achieve more competitive interest rates throughout her portfolio.
The due diligence process also went through, the loan settled, and our client was a proud owner of her first café.
