Do you trust your trust structure?

What critical element of commercial property finance differs the most between each of the banks?

Hot tip its not interest rate or LVR, although these do certainty vary.

The greatest difference is the way each of the banks assess and approaches the myriad trust and entity structures we Australians use to navigate our complicated tax laws.

A typical trust structure in Australia has a wide range of moving parts that many don’t fully understand, and its here I find policies between each of the banks differ the most.

For example when applying for a loan the question often becomes;

Who is required act as guarantor?

• Is it the directors or shareholders of the trustee company?

• Is it the unit holder of the unit trust?

• Is it the named beneficiaries or appointor of the trust?

• Is it those who might receive income distributions which in many cases are low marginal tax rate children, older or distant relatives?

Where does the bank look to assess income for debt servicing?

• Is it an average of last 2 tax returns / financials?

• Directors personal income?

• What if the entities have accounting losses?

• What if there are loans to other institutions?

• How does the bank treat inter-entity assets and liabilities?

When I comes to assessing commercial financing packages sometimes structure becomes king over price and fees which tend to be more straightforward.

#crefinance #commercialpropertyfinance #truststructures #bankfinance #commerciallender