Getting Debt Ready

Applying for personal or commercial debt can seem daunting and often people don’t know where to start or what information they need.  In some cases the list can be long and will vary from lender to lender, but below are the key pieces of information required to workshop any deal and at least get to a position where we can secure some indicative terms and / or pricing.  This way you can get a sense of where the market sits, we can short list some lenders and build some competitive tension for your transaction.

1.       Engage a broker

At Precision Capital, we are relentless.  Relentlessly devoted to our clients and relentlessly determined to secure the right outcome.  With over 20 years in finance and funds management, we have the relationships and expertise to run a multi-bank process to ensure these milestone moments in your life and business are not disrupted or delayed.

2.       Privacy act forms

This is an authority to disclose your details to third parties (i.e. lenders) and is our licence to represent your interests.  Your personal information and privacy are paramount and so this will be the first thing we get you to sign.  You don’t need to know where to find this form, don’t worry.

3.       Personal balance sheet

We often get asked why we need this.  While pledging personal assets as security may not be required depending on the transaction, it is always beneficial to talk to the strength of the individuals we are dealing with.  Naturally this is where we seek valuable information on existing personal debt and credit cards for servicing purposes, but it is equally important to highlight your assets that have been accumulated over time.  Stronger personal balance sheets represent a lower degree of risk for the lender and should ultimately have a positive influence on your interest rate.  We are more than happy to provide a copy of our template if required.

4.       Payslips, or Personal tax returns and tax assessment notices

Pay slips may suffice where your income position is straightforward, however, we find the tax returns tell a more complete story.  This is particularly the case where there might be other income sources like distributions from trusts, dividends and rental income etc.  If say an investment property was acquired after the most recent tax return was completed, it would be prudent to get a rental appraisal or provide a copy of the most recent rental statement to ensure we are appropriately maximising your income position.

5.       Debt schedule

While we can look to the financial statements of your business to get a sense of the commercial facilities, again this may not be an appropriate position.  Perhaps an asset has been sold and some debt has been repaid following the end of the period, or perhaps some new debt has been taken on.  Working capital facility limits are also difficult to ascertain from the financial statements.  Having an up-to-date summary of your commercial facilities (term loans, overdrafts, credit cards, asset / vehicle loans) allows us to accurately represent your position.  The last thing we want is to understate or overstate your position.  Understating your position might result in the lender reducing the amount you can borrow upon doing their final approval and overstating your position would yield a similar result as the business would appear to have more debt than it actually has, resulting in lower borrowing capacity.

6.       Business financial statements and any forecasts (if available)

Business financials is self-explanatory, but at Precision Capital we often find if this is coupled with management accounts (Xero or MYOB etc.) or even forecasts, it delivers a better result.  Often, we are supporting businesses that are growing and so the accountant prepared financials might be 6 months old and don’t represent the current trajectory of the business or take into account a new revenue stream or acquisition etc.  We would encourage you to work closely with your accountant to ensure your financial data is as recent as it can be and where possible, to produce forecasts.  Data is everything and so the better we can get it, the better the outcome we will achieve. 

7.       Corporate structure

This is important to understand the ownership structure and how each entity interacts with one another.

8.       ATO portals

Required for both income tax and GST and should ideally show no overdue payments and timely lodgement.  We get this may not always be the case for various reasons and so all we ask is that between you and maybe your accountant you help to understand why, and we can then go about solving for this.

9.       What do you need the money for and why?

This can be simple or elaborate depending on the deal at hand.  It could be the purchase of a residential or commercial property for investment purposes, or it could be a new venture, building a new premises or the acquisition of a competitor.  Help us understand how the money will be used, which could be in the form of an information memorandum for the property you are looking to buy, a business plan, a due diligence pack on a business acquisition or a feasibility for a new development.

10.   What else do you need help with?

Applying for finance requires effort and so it is important to think about other ancillary facilities you might need to optimise the process.  What we mean by this is, often we are so focussed on the loan required to buy the property, or business, or fund the new venture, but forget about the little things like credit cards, bank guarantees, vehicle / asset finance and working capital facilities.  Rather than deal with these items as an afterthought, take the time to think about your ancillary requirements and how they might need to change.

At the end of the day, by engaging Precision Capital for your finance requirements, we will ensure all of the above items are dealt with in consultation with yourself and your advisors.