Co-operative accountant who could provide an Accountant letter regarding the two related entities
Client was asset backed i.e. a property owner
Current asset finance facilities were more than 6 months old, paid on time and repayments were at least half of the proposed new loan
Using lender policy to go straight to the appropriate tier of lending for the situation
A Western Sydney landscaper was looking to purchase a brand new excavator, the Kubota U17 3HG for $39,989. This excavator would help him take on bigger jobs as well as work more efficiently on all job sizes.
He had a 10% deposit available but wanted to finance the full amount. He is a property owner, single and has no dependents.
The business was relatively new and operated under two ABN’s – one was fifteen months old and the other was two months old.
The second newer ABN was known as a holding entity which under the advice of the Accountant, was opened to hold the business assets and also for tax optimisation.
Client had two active Macquarie asset finance facilities and was a property owner.
The main challenge was that the new two month old entity which was required to hold the excavator did not have any income. Also, the other entity was a service entity which had some income and expenses but it only had one full year of financials, and which was a start up year that didn’t service.
Further to this, the sole Director on paper was previously a PAYG diesel mechanic. We could only establish just over a year of industry experience because client previously worked cash landscaping jobs for side income.
The excavator was needed first to generate the income required to service the loan but the business was less than two years old, so the usual option of using a major bank with cash flow projections was not an option. Also the business had just completed its first full year of trading where it had a substantial amount of one-off expenses and little income.
As a result we opted for tier two lenders that did not need to assess income to approve the loan. For a property owner, the lender would just require a credit reference from an existing or previous asset finance lender within the last 6 months, where the loan was no less than 50% of the new loan repayments.
In this scenario given the unique entity structure, we also workshopped with the lender beforehand, a template Accountant letter that explained the accounting / tax reasons for its existence. We did this with the lender through our BDM before submitting a full application which marked the credit file to ensure we had certainty of financing before engaging the precious time of the client’s accountant.
The full amount of the purchase price approved, no financial statements were needed and although it was with a tier two lender, it was only up to $40 more per month than a tier one major bank.
