Some Options For NZ Commercial Mortgages

There is a wide variety of lenders that have decided to close their doors for any new commercial borrowers. For some it was due to taking on bad loans which meant that they were carrying too much debt on their balance sheet. This means that for those who are still in the commercial mortgage market, they are having increased levels of business. This has also meant that some brokers are not taking on nay new business as they do not have ht e capacity to process all of their current lending business. There are some of direct competitors that have even stopped taking new loans, just to be able to process their current contracts. However some brokers are still able to offer excellent options for NZ commercial mortgages.


The way some lenders and brokers have handled this is to focus on certain areas. For example, some may be now focusing only on commercial properties and solid apartment buildings rather than looking at industrial premises. If the risk is lower, then it is easier to get commercial mortgage finance. Other lenders and brokers are still lending to a wide range of projects including, hotels, motels, hospitality venues as well as warehouses.

As the economy improves, the Debt Servicing Ratio is getting better i.e. lower ratios for the economy as a whole. However for the residential and commercial sectors the numbers are different and of course they vary considerably for each individual borrowing entity.  For residential properties the banks tend to look at ratios of 35% even higher ratios for commercial properties.

So even though there is plenty of money on hand with the main banks that is available for loans, they are more nervous than a few years ago about taking on risky commercial mortgages. To increase your chances of getting funding to buy you industrial property or warehouse for example, it will help your cause if you can reduce your Debt Servicing Ratio.

You can do this by reducing expenses. Almost every business carries unnecessary expenses which are a drain n their cash reserves. Create a budget if you do not have one already. Then look closely at what you are spending each month and see what you can eliminate. It can be a surprise to many companies how much they can save in outgoings. As far as getting a mortgage is concerned, the effect will be significant due to the multiplier effect of the ratio.

NZ commercial mortgagesYou can also take a serious look at how much you need to borrow. Be ruthless with this as the lower your borrowing requirement, the lower will be your DSR and therefore the more likely it is that your loan request will be approved.

Another obvious benefit of being absolutely honest about the amount you need to borrow is that this will also reduce your outgoings once the loan comes into effect. You will be paying less interest on a lower loan. You might also find that if you can bring your loan below a certain threshold, it will be perceived as a lower risk by the lender and so will attract a more favourable rate of interest for you. This again will lower your interest expenses. A good broker of NZ commercial mortgages will be able to advise you on this.

Leasing your building - image Stuart Miles

Leasing your building – image Stuart Miles

It may be possible that you can sub-let part of your building to another company. This rental income will be used in the overall calculation to assess your Debt Service Ratio as well as providing an additional source of revenue which can be sued to pay some of the interest. Remember though that this is income and will be subject to income tax so be sure to make an allowance for this in your cash-flow forecasting.

There are many other ways you and options for NZ commercial mortgages or factors to take into account. However, it can be a complex process which requires a lot of knowledge and experience. To make the process easier for borrowers and to learn some of the best ways to present an application for a loan, it is a good idea to talk to a commercial finance broker like Global Pacific. They have a number of brokers who can help and heave experience dealing in many different industries and with various forms of commercial lending.

There is plenty of information available about their services on their website here globalpacific.co.nz.

 

 

Why NZ Borrowers Are Opting To Mezzanine Finance

Mezzanine finance is a new term that is being seen more and more often in the commercial finance world, but it actually is not as new as people think it is. The problem is a lot of times people have not heard of this type of finance before and this is why they think it is so new and never been used before. It has been used by “people in the know” as a secondary tier of funding for a long time but due to the finance constraints of the last few years, borrowers have looked for different ways to get financing for the company growth and to fund their expansion strategies. By knowing what this is, it is easier for people to figure out why so many people are opting for this type of finance over the traditional methods that are available on the marketplace that so many people are using.

Ease Of Mezzanine Financing

Typically a good reason why people will turn to this type of financing, also known as mezzanine capital, is it is easy to obtain the required funding for their business. Since people are putting their business on the line and a failure to make repayments often means the business reverts to the bank, people will find it is easy to get the financing that is needed. Another problem with traditional financing options is that they can take many months to come to fruition. Under a mezzanine finance situation, people will not have to sit and wait for a long period of time to get the approval that they need to make the most of an opportunity. Instead, people will find they are generally approved within a couple of days to a couple of weeks.

Understanding mezzanine finance

Quick Availability Of Mezzanine Funds

Typically since the business has been approved for the funds so quickly the lender is also going to release the funds to the company quickly too. This means that people will find they are able to make use of the money right away and maximise their ability to move in their market. Often people use mezzanine finance to get an injection of working capital so they will not end up struggling to pay their bills on a regular basis. With this access to credit, people will be able to get the products or materials they need sooner so that they can begin the production, construction, or whatever their business activity is.  Clearly the faster they can get their product or service to market the sooner they can make profits and then repay the finance.

If Repayment Fails People Lose Their Business

A downside to this type of finance is people have to make sure they are paying the bank back on time. If they miss a payment without talking to the bank or even letting the bank know the payment may be late people could easily lose all of their business and inventory. This is the hard thing that comes with this type of finance, but it is something that can happen and this is often why the banks are so ready to lend on this type of financing because they are guaranteed to get the business if the loan fails. However, this does not mean that everyone will be approved which can make it hard for people to get the right type of financing for their situation.

Must Already Be Established In The Business World

Mezzanine finance company NZThis is the catch that has led to a lot of businesses being turned away from the financing they need. It is the case that people need to already be established in business with a proven finance record and accounts to show to lenders. Being new in business can be an significant impediment to a fledgling company since they do not have that track record. As a result a lot of businesses get turned down for bank finance. However, people will find that once they are established in business it is easier for them to get the financing they need, but they need to have accurate records of the sales and such to make sure they are able to get the approval they need. Without this type of track record of proven sales or being established in the business world it is very likely that the bank and the other lenders will not provide the funds that are required to help the business continue to grow and reach the new heights they need. However, mezzanine financing can be a way to overcome some of .these obstacles/

As a lot of people have found out it is nearly impossible to get their business financed because of the tight commercial lending market. This is when people should know more about why so many businesses and individuals are starting to opt to mezzanine finance to get the funds they need to expand their business operations. Once people know why so many places are turning to this type of finance it is easy for people to get their business off to a good start and know that they can finally make the sales they need to stay in business for a longer period of time.

 

Global Pacific http://www.globalpacific.co.nz/

 

 

NX_accountant_worriedfrontWhat You Should Know Before Financing Business Equipment

If you have a business and want to expand, the biggest problem you will face is financing that expansion. It is frustrating for many small businesses that even though they may be making a profit and good sales they are still frequently not able to afford to invest in new equipment for their business. One solution is to look at equipment finance.

For more on equipment finance see here.

 Choices for Financing New Equipment

In all industries there are different levels of quality. This applies just as much to the different pieces of equipment that might be needed in your business. You can buy from suppliers of cheap machinery and equipment or you can go to the top-end distributors for your try.

To take a simple example, if you have a beauty salon, then the equipment that is used in it will be seen or applied to the clients depending upon the services rendered to each customer. Bear in mind this is a beauty industry involved hair cutting, styling, outfitting, nail-care, and spas among other services. As such, the equipment needed might range from the standard levels of quality to extravagant types. The grade you go for will depend to a large extent o the discernment of your target market and your location. It will also depend on the maturity of your business. For example, the cheaper standard salon equipment might be the way to go for most salons that are starting up. Those that have a good name and reputation in the industry may opt to buy the more expensive equipment if that suits your business.

Do Not Overlook Discounts

It only takes a bit of research to come across equipment on sale at discounted prices. The deal might sound good, but it is wise to looking into the reputation of the supplier and the reasons why they are offering the discounted equipment. Are they using it to get your attention or are they selling off end-of-the-line equipment? This is not to say all supplier offer false discounts. Some can make bulk purchases of the equipment for the manufactures or get used equipment at a good price. Reputable supplies will sell good quality equipment are discounted prices. Just do some background check on the supplier, their reputation will surely help support the discounted sales offer.

New or Used – Both Have Benefits

In some parts of your business you will want to show customers the best equipment you have. Again using the salon to illustrate, you might want a new spa. In this instance getting a brand new one might make sense. However, if you need some new equipment to hygienically clean the hair and nail cutting tools, this is not going to be seen by your clients. In that case you might be advised to look for a serviceable second hand piece of equipment.

Look for Equipment Finance or Leasing Deal

Even with steep discounts, equipment can be a big financial stretch for some businesses. A way around this and to avoid a big call on your cash reserves is to look into the possibility of a leasing deal or an equipment financing arrangement. You should nevertheless do this with caution.

Equipment financing AucklandA number of suppliers do offer such options to their customers, but to only those they deem able and worthy of such extensions. The payments are in small monthly installments that will do not place a financial burden on the infant business as it grows. Just look at all financial options include the flow of cash in and out of the business before settling for an equipment financing option or leasing deal.

Alternatives to supplier equipment finance in NZ

While suppliers are often willing to provide various credit terms for equipment, they may not necessarily y be the best for your business. You should consult your firm of accountants to get their input on how you can finance new equipment for you company.

You can also talk to private commercial finance houses. They have various ways available for financing the purchase of machinery. One of the more common is called asset or equipment finance. In short, they provide the finance to the supplier and will take a security over the asset concerned. This does not place such a big strain on your business or you personally in terms of risk. It also enables you to get that new plant at favourable terms so you can expand your business.

For more information about equipment finance, visit this website.

NZ equipment finance