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Evolution of Commercial Lender Policies

Over the last 20 years many Commercial Lenders have developed policies that assess loan applications (up to specified amounts) with limited financial disclosure required. These are commonly referred to as ‘Low Doc’ loans and are designed to simplify the loan process and speed up the borrower’s access to capital. They have been used to good effect in circumstances such as:

– The borrower’s financial statements are incomplete;

– The borrower’s position is complex; or

– The funds are required urgently

Low Doc loans are usually characterised by higher interest rates and fees, representing a different level of risk. However, as the market has matured this cost differential has reduced with some lenders reflecting the quality of their loan portfolios and low levels of borrower default.

Arguably Low Doc style lending has contributed to a reduced ability of a lender (or finance broker) to understand a client’s business. This is not to suggest that Low Doc lending is a bad thing; the cautionary piece here is that taking what may be an ‘easier option’, may not always be the option that best suits your circumstances.

So what to do? Simply put, you need to partner with the right ‘trusted adviser’. In this instance we are referring to an experienced finance broker, who will work with you to understand your business and explore a range of options. They will help you determine your most suitable options, and be able to explain the pros and cons of each potential solution.

You will need to answer questions and provide supporting information, so that a full understanding and analysis of your requirements and business can be done and all your options considered. For a Finance Broker to lodge a loan application on behalf of a client they need to be comfortable that the proposal is in the applicant’s best interests and ensure it makes sense. This will put them in an excellent position to present the proposal in the best possible way to a lender and get a great result for their client.

An experienced Finance Broker will understand the nuances of a range of lender requirements. Once comfortable with the proposal, they’re able to navigate these and determine the best way to use the financial information available to support it. They can also properly assess a situation, and avoid submitting deals that won’t meet requirements. This saves a client stress and ensures other options are kept open.

The importance of a trusted adviser is evident when dealing with your business finances, and can provide huge benefits. We would welcome the opportunity to work closely with you, to help improve financial outcomes for your commercial lending requirements.

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