100% LVRs for Owner-Occupied Commercial Property

by | 17 Aug 2021 | Business & Corporate, Commercial Property, Property

This is genuinely possible – so listen up if your business is currently renting.

The maths can be pretty simple at the moment:

  • 6% yield net rent is pretty typical, i.e. a $1M property rents for $60k plus outgoings
  • Interest rates are currently between 2 to 3% (depending on LVR etc.)
  • $60k pa loan repayments at 2.5% rate, repays the loan in full in:
    • $1M loan (100% LVR) = about 21 years
    • $800k loan (80% LVR) = about 16 years
    • $650k loan (65% LVR) = about 12 years

Option 1 – Government Guarantee – until December only (*Conditions Apply)

If you qualified for JobKeeper in the March 2021 quarter and your turnover is less than $250 million, then you can qualify for phase 3 of the Federal Government guaranteed loan scheme. Basically, a bank gives you a loan of up to $5M, which the government will guarantee 80% of (so if you don’t pay them back, the bank only loses 20%).

There are a couple of banks that are willing to use this scheme to lend up to 100% LVR for owner-occupiers to purchase a commercial property.

Of course, there’s a catch though… You must have received JobKeeper in the March quarter AND also be performing well enough now that a bank is willing to lend you the money.

CORRECTION – on 25th August 2021, the Govt announced that businesses no longer needed to have received JobSeeker – this scheme is now open to ALL businesses with turnover less than $250 million!!

Also, every bank is looking at this scheme in a different way, so a good broker/adviser has never been more important to get one of these deals done.

So this scheme certainly doesn’t fit every business – but if you think it might fit for you – hurry up and call us now (because the loan needs to settle before 31st December 2021!).

Option 2 – Leverage against your business

An oldie but a goodie – and one that many don’t think of – and this one doesn’t expire at the end of 2021.

Depending on what kind of business yours is and what the financial position looks like (leverage on EBITDA and/or balance sheet strength), it can certainly possible to leverage against your operating business to purchase an owner-occupied commercial property.

It basically works like this:

  • For smaller commercial properties (loans up to $3M), some banks are willing to lend up to 80% on owner-occupied properties; for larger properties the norm is 65 to 70%.
  • For the balance 20 to 35% equity, a loan can be written off the strength of the business. This can be done in myriad ways – sometimes a Debt/EBITDA multiple, sometimes a balance sheet ratio, sometimes against specific balance sheet assets.

How do you find out what options are available to you?

Every business’s situation is completely different and the way that each bank looks at a deal is completely different. Because we structure & negotiate deals all the time, we’re best placed to analyse your situation and work out what’s possible – and then if it’s a green light from our point of view – put together a pitch to banks to seek a funding solution that achieves your goals and unlocks your opportunities.

Get in touch with us today to find out whether this might be possible for you and your business!