FAQ & Finance library
help for your business
How long does it take to get a pre-approved for my loan?
Generally, Allloanz can give you a preapproval to work with after you complete the online application and a brief discussion with Chris or other mortgage broker in our office.
How long does it take to get unconditional approved for my loan?
Generally, if you are a new client the time it takes for an unconditional approval can vary considerably. Basically, it will depend on how quickly you can complete our fact find and provide us with your supporting documents. Once we have this information, we will discuss your needs and wants with you, then assess you against all our lenders policies and their lending guidelines to come up with a shortlist of lenders. (This usually takes one day) We will then provide a credit proposal explaining in detail our recommendation and costs associated with our recommended loan. If you are happy with our recommendation of a lender and their features and interest rates, we can then prepare you electronic loan lodgment directly with the chosen lender in your behalf. (This usually takes another day) Lenders typically take from 5 business days to 6 weeks to issues a formal approval, as sometimes they ask for clarification or more information first. If you are in a hurry we recommend a lender who will assess your loan faster.
How trustworthy is Alloanz?
Chris has been looking after his customers for over 25 years and has a 5-star rating and excellent reviews for current clients and clients that have now paid off their homes.
Does Allloanz verify income?
Yes, Alloanz verifies your income from pay slips and bank statements for PAYG, and from business financials and banks statements for self-employed clients and businesses.
Does Allloanz hurt you credit score?
When we check a clients, credit score it is known as a ‘soft touch credit enquiry’ and does not impact your credit score. If you have not paid your previous payments or a bank has declined your loan application, this will impact your credit file.
What information do I need to provide to find out how much I can borrow?
We can give you a preapproval that is subject to the lenders final credit assessment against their lending policies. There are two things we discuss before we can give you a preapproval.
- Borrowing capacity
- Loan to value Ratio (LVR)
How do I know or find out what my borrowing capacity is?
We work out your borrowing capacity by adding all your incomes, minus your current loans, credit card limits and store card limits repayments, minus your current living expenses, lenders call this HEM.
What is HEM?
HEM stand for Household Estimated Monthly expenses. Lenders derive these estimates from your income, postcode and how many dependent children you have.
What is the LVR or Loan to Value Ratio?
This is the ratio of the loan to property value, for example a $400,000 home loan for a $500,000 property value is 400,000/500,000 X 100 = 80% LVR.
What is Lenders Mortgage Insurance?
This is a premium that lender make you pay if you borrow more than 80% (or 85% with some lenders) of the property value, LVR over 80%. Sometimes it is necessary when you don’t have quite enough deposit. Remember this insurance does not protect you in any way, it insures the banks risk but you pay the premium. If you default on your loan the insurance covers the bank liability, and then the insurance company comes after you for their loss. For first home buyers talk to us and review the first home buyer information page for Government incentives and discounts.
AAA – Reference to the top credit rating (Standard & Poor’s).
AMR – Average Monthly Revenue.
Amortisation – This is the process of lowering a debt or book value of an intangible asset over time, A principle and interest loan is an amortising loan showing the systematic repayment of debt.
Basis Point – One hundredth of 1%, 100 basis point is 1%.
Capital – The value of the investment in a home or business, equal to total asset minus total liabilities.
CPI – Consumer Price Index, a quarterly measurement in he price of a fixed list of goods and services.
Credit Rating – This relates to a person or business relative credit worthiness, a score over 600 is considered good.
Default – This is a failure to meet a debt obligation when it fall due.
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation. This is an accounting measure use by lenders showing operational earnings that provides a more accurate view of the performance of a company’s core business instead of the net earnings of a company.
Expansion Capital – This is referred to the available funds for the expansion and growth of a business.
Financial leverage – this is where borrowings are used to increase profits, it is a ratio of liabilities divided by liabilities plus equity.
IRR – Internal Rate of Return is the return over the life of an asset or investment that combines capital gains and income earned.
Liquidity – How easy an asset or investment can be turned into cash.
LVR – Loan to Value Ratio, the amount borrowed divided by the value of the security expressed as a percentage borrowed. For example if you borrow $450,000 on house worth $500,000, the LVR would be 90%.
Mezzanine Finance – Finance that provides flexibility to a business, by providing additional funds with a higher LVR and at a higher risk for the lender. The mezzanine funder is a subordinate in the event of a credit default.
Net Rate of Return – This is the return on an investment or business after all interest, running expenses and maintenance costs are take out.
Offset Account – This is a transaction account linked to your home loan. You can deposit or withdraw from it as you would with a regular transaction account. The big difference is that when you leave money in an offset account over a period of time, you reduce the amount of interest charged on your home loan. For example, if you have a home loan balance of $100,000 and you have $10,000 sitting in your offset account, the bank calculates the interest on your loan as $90,000 instead of $100,000. So if you put money into your offset account like you do with a regular savings account, the money left in the account is saving you interest on your loan, this can help you pay your loan off quicker. You don’t earn interest on the funds in your offset account, you reduce (offset) interest on your loan.
Property – refers to real property assets such as office buildings (commercial) shopping centres, industrial estates, motels, holiday and residential properties.
Risk – The measure of uncertainty of a borrowers capacity to meet the obligations in a financial transaction.
Security – Real property or chattels that can be used to borrow funds against.
Trust – A person or persons (the trustees) hold assets for the benefit of some other person or persons (the beneficiaries).
Trustee – Can be an individual or a company, that follows the rules of the trust deed (formal legal document).
Underwriter – A company that buys securities from a company and resells them to investors.
Yield – The return of an asset or investment that is calculated as the income divided by its capital value and expressed as a percentage.
The Importance of a Business Plan – Planning for small business and commercial loans.
Situation Analysis
These descriptive elements give a lender a strong sense your business drivers, the passion underpinning the SME and the business knowledge that will ensure success. The situational analysis should cover the following points;
Purpose
Why do you exist? This short description should clearly outline why you are in business.
Vision
What does SME want to achieve over the long term? Build the business to sell, list on the stock exchange, go global, service a niche, create a legacy, what is the end game for the SME. What market or industry does you SME work in and how does it generate revenue?
Goals
These are the milestones along the way, or a bite out of the vision. What do you plan to do over the next 3 months, 6 months, 1 year, 2 years that will bring your business closer to the vision? Are the goals aligned with you purpose?
Operations
How do you operate? This could include:
- The management structure;
- Personnel numbers and their roles;
- Products and/or services offered;
- How products and/or services are delivered/provided;
- Revenue streams from products and/or services;
- Revenue collection methods and policies.
Structure
For most SMEs, the owners and major shareholders and are the ones running the business and who make the critical decisions. The business plan should communicate to lenders the experience and expertise of the owners and how that relates to the purpose and operations above. The owner’s CV is useful to highlight these areas. Where there are gaps in the owner experience or expertise, these should be addressed within the management structure, knowledge and skill sets of others in the SME.
Funding
What were/are the financial contributions of the shareholders and owners to get the SME started? How will the business continue be funded until/as it becomes profitable? How will borrowed funds be utilised? Some detail is important here as there should be a clear connection between the loan and how it will be used to contribute to the business growth and sustainability.
Industry
Describe the market your business works in. The business plan should answer questions regarding the future demand and ongoing popularity of the products and services being offered. How will the business adapt to changes in the demand for its products and/or services?
Competitors
How does your SME differentiate itself and gain market advantage? It is important to compare similar businesses in this section and determine your SME’s points of difference. These may include products/services, systems, marketing, delivery, location etc.
Don’t assume you don’t have competitors, every business has competitors. A good way to summarise and complete the above areas is to compile a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. Further, a well-constructed SWOT analysis can help prioritise areas of importance and how they will be addressed.
Marketing Plan
Today the way SMEs promote themselves is increasingly important. Word of mouth and client testimonials is still one of the foundations for growing your business, however in today’s markets this may not carry the same influence it once did, and your marketing plan should show how you will attract clients as well as keep them.
Target marketing demonstrates a well-thought-out approach which helps you be more specific with the marketing strategy and roll-out. This demonstrate to a lender that you know about your target market, how your products and/or services align to their needs and what their buying habits are. This gives a lender confidence in your SME’s capacity to service the loan.
The Importance of a Business Plan – Financials for small business and commercial loans.
Financials
All lenders focus their initial attention on the SME’s financials. This doesn’t mean you should ignore the situation analysis of the business plan. On the contrary, this is critical in establishing and supporting the figures and assumptions that are provided in the financials.
The financials section of the SME Business Plan should cover the following points;
Projections
Remember, these are just estimates and assumptions. They should be best guesses and considered assessments and be backed up by the descriptions in the situation analysis. For example, when introducing a new product offering for the SME (as evidenced from the SWOT analysis), the credibility of revenue and expense projections would be enhanced if development costs were immediate and income generation deferred to reflect realistic anticipated product development time.
It can also be a good idea to show a range of projections – from conservative to best-case scenarios. Again, this tells the lender the SME is motivated yet circumspect and not just riding a wave of misguided over-confidence and bravado.
Use Broad Categories
The financials you provide for lending purposes do not need to be overly specific in relation to such things as revenue from individual products and services. These may be worthwhile for business management reasons, but for lenders, it may be overkill.
Don’t just project a single revenue line if you have more than one income source. Lenders want to see the range of products, services, or market segments that are generating income for your business.
Financial Ratios
Lenders commonly use some standard financial ratios to assist in their analysis and make comparisons against other SMEs that they have either lent funds to, or declined lending requests. Your broker will calculate these ratios to discuss with you what your financials show. Are they aligned to best practice business thinking and shrewd financial management? The ratios to be referenced in the situation analysis of the business plan are as follows.
Additional Working Capital
Working capital refers to the available funds a SME has to fund growth or expansion. It is calculated as current assets less current liabilities. Typically, where this amount is insufficient to fund growth, additional working capital is required, and lenders are approached.
Rolling 13 week cash flow forecasts – How much cash is available and for how long? If the financials provided to the lender clearly set out the calculation of required working capital, it will demonstrate a strong grasp of the SME business and reasons for the loan request.
Return on Investment (ROI)
SMEs that set specific ROI targets are telling lenders that they are not only focused on overall business success, but they will be well-positioned to service their annual debt requirements. After all, the investment into a SME is a combination of owner ‘sweat’ equity (salaries forgone in the initial start-up stages), private equity (shareholder contributions) and debt (borrowed funds). All parties want ROI.
The Importance of a Business Plan – Goals for small business and commercial loans.
The three most important business goals:
- Drive up profit and cash flow.
- Leverage the business growth.
- Build wealth for the owner (your nest egg).
How should a business use it net profits wisely?
- Reinvest in assets.
- Pay back debt.
- Take an income home.
Why reinvest in assets?
Assets are the primary resource to generate sales income for the business.
What should your business be doing to survive COVID-19?
Invest in your business to drive up sales to build up cash reserves. plan now and acquire assets that generate revenue and then step up the marketing. Questions to ask yourself in preparation for this game changing global crisis
- Have you got the liquidity in your business for cash flow to keep going?
- Have you check your overheads? Ensure you manage cutting costs so you don’t cut opportunities.
- Do you have access to capital, a sufficient capital base, and also access to funds as required?
- Does you businesses need to overcome the fear of debt to get sustainable levels of growth?