Business Lending

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Business lending involves funding the purchase of a business or the refinancing of existing business debt.

Whilst business lenders will extend a loan secured by the assets and value of a business, more often than not, the lender will seek real estate security (be it a residential or commercial property).

Lender Security

Lenders will only lend against the value of the business where

The business is deemed to be a ‘high value’ business with a solid intrinsic goodwill value
In an industry with high barriers to entry
Where the business has many and varied clients, not reliant on one or two major customers.

If a lender is prepared to lend against the value of a business, typically the lender may end up to the following ratios, i.e.

Goodwill – approximately 50%

Plant & Equipment – 25%

General Overview

When the lending is secured by the assets of the business, the interest rate is higher and the loan term shorter. Business lending is similar in many ways to commercial lending, i.e.