Home Forums Money matters Loan rejection!

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  • #986972
    Davejochow
    Member
    • Total posts: 38

    Hi
    I run a small business which I need to buy stock for. I’m extremely limited as I applied for a line of credit through my bank and just got rejected. I need around $20000. I don’t know why I got rejected, something about my home loan is not covered by rent I received. Bizarre. Anyway I was advised not to tell the bank it was a business loan because they would double their application fee. On top of that it took a month for the bank to process the application and time is money. Anyway we have a good history of paying our repayments. Even our broker was surprised we got knocked back. I have paid off 1/3 of our house so I could borrow against it. So to cut to the chase. Need 20000, need it as soon as possible, need low interest rates! Love advise. Thx

    #1160425
    No Limits
    Member
    • Total posts: 48

    Why are you paying off your own house?
    Minimum deposit and interest only with LOC or offset account is a much better way to access and control cashflow.
    If you refinance now, set up with interest only and linked offset account you should easily have the 20k available instantly, if not, go LMI and borrow to a higher LVR.
    Should be able to do this pretty quick and rates are good right now, maybe 4.8% variable.
    Sounds like your property is an investment as you mentioned rent being received.
    Who told you to set up such a structure and pay it off?

    I’m not qualified to give this advice so always seek “professional” advice before acting. We all know “professional” advisers are always acting in your best interests……maybe.

    #1160426
    MH08
    Member
    • Total posts: 284

    So, the loan your getting, how do you expect to claim expenses on stock if you have the loan seperate to your business? Forward losses for the month or year, GST costs?

    The bank may have discovered you have a business and taken into account that it may not be as profitable as your saying?

    See either the broker screwed the application up or maybe left a key area blank for some unknown reason, disloyalty to a bank can have severe repercussions in the future. Be honest with your bank, give them everything they only require for the loan, and make sure they can’t say NO and keep on their backs about it, don’t let formalities slow the process.

    Don’t worry about the double fee’s, intangible costs today have bigger values in the future like you have just discovered a month later.

    Also without disclosure of your financial records and how the application has been filled, advice on here would hold little value other then inspiration to do it again (which is what we all need :) ).

    No Limit’s has a very good idea but also a time destroying process. If all else fails, goto another bank, you may be small business but threatening to jump ship can also make them bend over backwards because they know bad news travels fast these days, especially when they have 50,000 likes on a facebook page and everyone follows suit with bads news.

    Go back to the broker and discuss which will the cheapest, quickest and productive way to re-apply for the loan.

    Cheers,

    #1160427
    Tim@Zinger
    Member
    • Total posts: 21

    Your whole story is quite bizarre from the 1 month it took to process your application to you not knowing why it got declined. First thing I would suggest is to find out exactly why or your broker should find out for you.

    A lot of lenders will allow you to set up a new loan account secured by your current mortgage for working capital funds as long as the whole loan doesn’t become for the business but maybe the lender you’re with isn’t one of them?

    Or, possibly, your self-employed income just isn’t high enough or the business hasn’t been operating long enough.

    #1160428
    AngusP
    Member
    • Total posts: 53

    I suggest you talk to a broker. I’ve had an excellent broker (via [business name removed]) who was always very good at knowing how the banks would react to the various borrowings I’ve done with them over the years.

    #1160429
    No Limits
    Member
    • Total posts: 48
    AngusP, post: 185850 wrote:
    I suggest you talk to a broker. I’ve had an excellent broker (via [business name removed]) who was always very good at knowing how the banks would react to the various borrowings I’ve done with them over the years.

    I would have though excellent broker and [business name removed] would be mutually exclusive, but it’s possible there may be an exception once in a lifetime.
    And that also depends on your interpretation of excellent of course.
    Most excellent brokers would not be working under these franchised structures for long before realising they need to get out their and do their own thing.

    #1160430
    AngusP
    Member
    • Total posts: 53
    No Limits, post: 185860 wrote:
    I would have though excellent broker and business name removed] would be mutually exclusive, but it’s possible there may be an exception once in a lifetime.
    And that also depends on your interpretation of excellent of course.
    Most excellent brokers would not be working under these franchised structures for long before realising they need to get out their and do their own thing.

    Highly debatable. I’m no advocate for [business name removed] per se but my broker (in Adelaide) deals with a whole range of banks and I found her to have an impeccable record at putting forward loan applications that were approved.

    I’m not sure that just because she was in a franchise structure, limited her ability to do a good job …

    #1160431
    No Limits
    Member
    • Total posts: 48
    AngusP, post: 185861 wrote:
    Highly debatable. I’m no advocate for [business name removed] per se but my broker (in Adelaide) deals with a whole range of banks and I found her to have an impeccable record at putting forward loan applications that were approved.

    I’m not sure that just because she was in a franchise structure, limited her ability to do a good job …

    Good to hear.

    I hope she also takes into your future plans and makes the correct selections based on your intentions. The best loan for one persons plans won’t be the best for another. You got to look at the big picture and you won’t know until you get further down the track if there has been something set up sub-optimally.
    If you plan on taking on lots of debt for example, you have to take the more restrictive lenders first, even at higher rates, so you can get the easy money later when not many lenders will look at you.

    My qualification of an excellent broker would be one with at least 5-10 years industry experience dealing with clients ranging from single home owners to more experienced investors with 20mil + borrowings.
    Without this real experience at these levels, I just don’t think they would be a gun broker.
    Since they are a no fee service, you deserve the best on your team.

    #1160432
    bb1
    Participant
    • Total posts: 4,485

    Just because the loan was rejected doesnt mean the broker was no good, there are a multitude of reasons why a loan could be rejected.

    For a start I would be concerned that you have gone in with the attitude of not telling the correct reason for wanting a loan, not a good way to start a business relationship with your lender. Would you like it if your clients werent as honest with you.

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