With tightening lending criteria, the knowledge and experience of a good commercial loan specialist can be invaluable. Commercial loan specialists have an important role in helping you obtain finance.
The amount you can borrow will be determined on a case-by-case basis. A good commercial loan specialist can help determine your borrowing capacity based on a number of aspects such as the industry you are in and the type of security you have.
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Generally, your borrowing capacity will be expressed as an interest cover multiple. Interest cover equals your net income before tax and depreciation divided into interest expense.
A fully secured loan such as a commercial property loan restricted to a maximum loan-to-value ratio (LVR) of 65 per cent may be based on an interest cover multiple of 1.25 -1.5 times.
A business loan secured by cash flow and/or partly secured by property may need an interest cover of three times or more.