Frequently asked questions on Business & Commercial Loans

Here are some  frequently asked questions and our  general replies on Business and Commercial Loans.


1. What do I do to raise a business loan?  
2. How much can I borrow to buy a business?
3. What interest rates and terms can I expect?
4. What type of security do banks accept? 
5. How can I buy a business if I do not have a property or cash?
6. What documents /information bank need for extending business loan? 

8. How long does it take to process an application?
9. Can I get a pre-approval of   business loan like for home loan ?

1. What do I do to raise a business loan? 

Whether you want to buy a new business, improve cash flow of your existing business or buy a commercial property or acquire an equipment/machinery give us a call or contact us online and we will come back to understand & analyse your situation and look after you   through the entire process of getting finance at best terms.

2. How much can I borrow to buy a business?

The amount banks are prepared to lend you depends upon your needs, your capability to repay from your income and collateral security you have to offer. If you borrow more , your repayments will be larger and bank will require more collateral and stronger cash flow from your business so that you have sufficient money to repay.

As a rule of thumb banks will lend you between  35 to 65% of the purchase price of the business. If you are buying a good franchise it is around 50% but can go up to 75%  and if you are buying a stand alone business it can be towards 35 % or more. But there is no hard and fast rule. Banks look at the type of business, its cash flow, management system, past performance of business, your experience and capability to operate such business etc etc. The fixed assets and good will of the business undoubtedly count towards banks’ comfort level while lending to a business.

For specialised businesses like hotels and motels etc. (land and buildings), banks tend to lend 50 to 60% of collateral security . It is to be noted servicing of debt from business resources and your other resources should be to bank’s satisfaction.  We always have upto date knowledge of banks lending criteria. Just give us a call or alternatively  enquire online and we  will contact you.  

3. What interest rates and terms can I expect?

Business loans are invariably   secured by residential property,  commercial property and business assets. Interest rates are lowest for loans secured by residential, higher when secured by commercial property and still higher when secured by just business assets (without collateral).
 These are just some of  the factors that influence interest rates determined by banks. Other factors which determine interest rates  are type of industry, whether it is a  franchise, risks inherent in the business etc.  
These days banks generally consider lending for 25 years against residential security, 10 years against commercial property as security and normally 3 to 7 years when lending against business assets/cash flow only.

4. What type of security do banks accept? 

As said before, banks are most comfortable to accept residential property as collateral security and generally lend up to 80% thereagainst if your income can service the debt.  That is why most people use equity in their homes/rental property. Moreover interest rate will also be lowest –just similar to home lending rates and repayments are also low as such loans can be paid over long period of around 25 to 30 years.

Other good security considered by banks is commercial property. Banks in general lend upto 65% of commercial property value. Interest rates are higher for loans against commercial property  as  compared to loans secured by residential properties. 

Banks also lend against plant and machinery  and business asstes. Some banks have separate arms for this type of lending.

 5. How can I buy a business if I do not have a property or cash?

You should look for some friend or relative who can provide some collateral security  for your loan. Banks take them as guarantor for your loan. Alternatively banks also consider your loan request if vendor  is happy to leave some money say as  equity or subordinated debt  in the business. Call us or contact us online and we will advise what is best solution in your situation. 

6. What documents /information bank need for extending business loan?

Banks need:

a.) Profit and Loss and Balance Sheet of the business you are buying for last three years (also called Statement of Financial Performance and Financial Position). 
b.) Sale -Purchase Agreement 
c.) The amount you are looking to borrow 
d.) Cash or security in the form of equity in property etc you can provide. 
e.) Information about  your background, experience and capability to run the business you are buying
f.) You should be 18 years or more in age and New Zealand citizen or permanent resident.

But you need not worry for this part. Just pick up your phone and call us or contact us online and we will make it very simple for you. 

 8. How much time banks take to process a business loan application?

Normally 4 to 5 working days provided all the required documents and information have been provided.

9. Can I get a pre-approval of   business loan like for home loan ?

No, banks do not give any blanket approval for loan unless you identify the business. If you identify the business you wish to purchase and provide required information about it and yourself , we can arrange pre-approval from a bank. 

These are just a few questions. If your question is not answered, you are welcome to call us or contact online and we will be happy to reply all your questions. We can  help you, only when you contact us.

Our job is not simply completing your application and sending  it to bank and telling bank’s reply to you. We understand your situation and out of our in-depth knowledge and extensive experience, check up as what is needed to make your application get bank’s approval. We, therefore closely work with you to make you bank’s ideal client and prepare your application which should get banks’ approval.