I had some clients come to me a while ago who were looking to get out of their Vendor finance on a business they purchased a few years before. The terms of the vendor finance were killing their cashflow and they were not making headway into the debt.
Banks are not always fans of vendor finance, BUT as long as there is a contract in place for the purchase of the business and or buildings and a repayment track record is present showing that payments have been made on time as a bank loan would. Then the task is made much simpler. Usually you would need to be trading for at least 2 years.
Of course the ability to repay the debt must also be shown on the banks terms and each bank does it differently. There cannot usually be any tax debt (unless it is being refinanced but this is a complete other scenario) tax returns must be up to date, including financials with an up to date debtors and creditors. No one likes to see bad debt especially not a bank!
The clients were in a good position so by nearly owning their home, and refinancing their vendor finance position including the commercial property they worked from. They showed sufficient ability to service the new loan from income, an ability and willingness to repay debt.
In cases like this what I do is find the right bank for you, it is not always about the best rate. It comes down to a multitude of factors like;
Who is willing to work with you?
Are they hiding any charges from you?
Can they help you in other ways like day to day banking or merchant facilities?
Is there asset finance this bank can take over or improve?
It certainly can be a mine field, having a broker on your side can make a huge difference. Like it did with these clients who were able to increase their cash flow position significantly, pay off their home and start to eat away at the commercial property and start to really build for their future.
Call me on 0412 008 048 to see how I can help.
Justin Cornock
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