Making the commercial funding process work for you
In today’s economic climate, how you structure and obtain funding has never been more critical.
To succeed requires substantial planning, coupled with market knowledge, and backed up with clear, concise documentation.
Specialist commercial funding consultant and founding director of Strata Funding, Alan Robertson, explains why obtaining the correct funding package for any commercial property or business is a complex exercise.
“It goes without saying that the market is extremely challenging at the moment. The environment has changed and the days of obtaining finance comparatively easily have ended. This, to my mind, in the longer term is not entirely a bad thing – but of course life will be much easier for all when business – and finance – flows more easily again!”
“However, for those of us who have worked in the financial sector for years, it’s not the first time we’ve witnessed tight credit conditions. For instance, back in the 70s, 80s and post GFC, obtaining credit, funding or finance was considered more a privilege than a right.”
So what does this mean, in practical terms, to you as a potential borrower looking for funding for a commercial or business project? You could be looking for finance for a business acquisition or a restructure of existing funding, property development or purchase of an existing property for investment, redevelopment or for your own use.
Loan applications are an applied science…
it really is a question of do it once and do it right
Robertson says to be successful, any loan application must provide full disclosure of your circumstances and planning. This will then be matched to the appropriate lending source with an application tailored to meet your needs and their specific requirements.
“Loan applications are an applied science,” he says. “It really is a question of do it once and do it right – you won’t get a second chance to tweak any application in this market!”
Alan goes on to say that this just underlines the importance of structuring your loan application properly.
“And that means full disclosure of your circumstances – and I mean full disclosure – and projecting cash flow, cash flow and cash flow.”
“It requires a full overview of your personal and business affairs as well as information about any existing personal guarantees. Then there will be annual accounts, valuations, consents – and the list goes on. From all this information, we determine a clear picture of what is needed and how to best structure the proposal.”
If you’re looking at undertaking a property development, the valuation needs will include the “as is” value of the property, value at completion, resale factors and future saleability. Robertson says the complexity of what is needed should never be underestimated – and with current market conditions – whether for the uninitiated or even the experienced, this can be difficult to put together and achieve.
“But, with a properly prepared, tailored individual funding proposal, coupled with the market knowledge necessary to connect the borrower with the right lender, this can be effectively achieved.”
“And that’s where working with a professional commercial finance consultant really makes the difference. We’re dealing with the market on a day to day basis; we know what’s going to work and what’s needed. We’ve also built up our networks with lenders over the years we’ve been in business – and that really makes the difference!”
In addition, the loan must fit both today’s needs and tomorrow’s requirements.
“Commercial and business funding has to have relevance and longevity. Funding arranged for today’s purchase could have major implications over the funding of future projects in, say, two or more years time – and that, you can rest assured, will be in a different marketplace again.”
The best first step, he says, is to start off by building a working relationship with a highly competent commercial finance consultant.
Funding arranged for today’s purchase could have major implications over the funding of future projects…
“Professional commercial finance consultants have long term knowledge of the sector and an established track record of success.”
“Our experience clearly shows that the best results come from establishing long term relationships, both with our clients and the lenders with whom we work. In practical terms, what that means is by our obtaining an understanding of your needs, plans and aspirations we can make sure the funding package arranged really suits your long term goals.”
“Make sure, as well as the skill to put together an effective proposal, your consultant has excellent and proven working relationships with a wide variety of funders – these could be mainstream lenders, merchant banks or even private funders.”
Robertson says your consultant also needs to tell you what is feasible. “After all, better to know whether your project is viable at the beginning, before you incur costs obtaining consents, valuations and so on.”
“It’s imperative to be realistic, factual and to make sure your funding has relevance for the long term. The importance of working with a professional commercial finance consultant cannot be underestimated – they literally will make your deal work for you.”
He says the costs for such services are success based and should always be agreed at the beginning of the project.
“Success in any commercial property or business venture can, we believe, be directly attributed to effective long term relationships between clients and their finance consultant, the lenders and valuers, quantity surveyors and other consultants who all form part of the overall development process.”
It’s imperative to be realistic, factual and to make sure your funding has relevance for the long term.
And, he says, the relationship between finance consultant and client should be ongoing.
“At Strata Funding we don’t stop working with our clients once funding is in place – we keep working to make sure everything runs smoothly. We believe it is critically important to facilitate the overall process and assist you with any challenges you meet along the way!”