You have been declined for a business loan

Most business loan declines are policy declines rather than judgments about the business. A bank lends to a template, and a file outside the template is refused regardless of merit. HomeSec lends against equity in real property, assessed on the business purpose and the exit, from $20,000 to $5,000,000. Having been declined elsewhere is not part of our assessment.

A decline is a policy outcome, not a verdict

This is the part almost nobody explains. A bank does not assess your business and conclude it is a bad business. It runs your file against a template, and if any single field falls outside the template the file stops — often before a human has read a word of it.

That is why profitable businesses with real assets get declined, and it is why the decline letter tells you nothing useful. The template is not about you.

What they are actually rejecting on

• Serviceability. The most common one. Not whether you can repay, but whether the calculated surplus clears a buffer applied to a stressed interest rate.
• Financials and lodgements. Two years of returns, current BAS, an up-to-date ATO portal. Miss one and the file stops at question one.
• Trading history. Two years for a bank, six to twelve months for a cash-flow lender. A start-up fails on arithmetic, not on merit.
• Score thresholds. Cash-flow and unsecured lenders apply a hard cut-off. Below the number, no human sees the file.
• Bank feed patterns. Dishonours, low average balance, or a few days below zero read as risk regardless of the reason.
• Industry code and postcode. Construction, hospitality and transport carry policy loadings. Some postcodes are excluded outright.
• An ATO balance. A bank reads it as an adverse credit event. See ATO and tax debt funding — for us it is usually the reason for the loan rather than a reason to decline it.

What we assess instead

Three things, and none of them is a score.

• The property. Residential, commercial, industrial or land, held personally or by a company or trust. To 80% of value on residential security, 70% on commercial.
• The purpose. It has to be a business purpose. That is a requirement of how we lend, not a preference.
• The exit. A sale, a refinance, a settlement, a contract payment — something dated and identifiable. This carries the most weight of the three.

We do not require financial statements, tax returns, BAS, cash flow records, a trading history or a sworn valuation. Those are the fields that caused the decline you are reading this about.

Being declined is not information we hold against you

We are not assessing the same thing the last lender was, so their conclusion tells us very little. What we would like to know is why — not because it counts against you, but because the reason usually points straight at which instrument fits. Declined on serviceability with good equity is a caveat or a second mortgage. Declined because a refinance stalled in credit is bridging. Declined because the returns are not lodged is its own conversation.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Catriona Anderson, General Manager