Your business loan rate moved before the Reserve Bank did
The Reserve Bank lifted the cash rate to 4.60% on 29 September, but for many business borrowers much of that rise was already in their rate, through BBSW. This edition covers why, how the first ETA Academy went and what we covered on the day, the three questions almost every business buyer asked me in September, and the record month for business property lending.
The rise was already in your rate, through BBSW
The Reserve Bank lifted the cash rate to 4.60% on 29 September. For many business borrowers, much of that was already in their rate. Most floating business loans are priced off BBSW, the bank bill rate, plus a margin, and BBSW moves on what the market expects well before the Board meets.
Over those months the 3-month bank bill rate climbed from 4.44% to 4.73%. Our breakdown, published the week before the decision, has a calculator you can set to your own facility.
Having spent years in banking, the part of the rate I'd look at now is the margin. It was set when your facility was approved, and your business may look quite different today.
Twenty searchers, one room, the whole path from sourcing to settlement
As promised last month, here's how the inaugural ETA Academy went. On 2 September we co-hosted it with TEN13 in East Melbourne, alongside Liston Newton Advisory, Taurus Lawyers and LINK Business Brokers. Twenty people actively searching for a business worked through the full path to ownership with a complete deal team in the room: sourcing, evaluation, due diligence and capital structure.
The highlight was two operator firesides. Matthew Williams from All Essential Fire Services and Stijn de Vriendt from Custom Transport Equipment spoke openly about deals that fell over and what year one looks like once the vendor steps back. I closed the day on how a credit team reads an acquisition file.
We'll run it again. If you're searching, or thinking about it, I'd be glad to talk through where you are.
Three questions buyers asked me all month
Do I need property to buy a business? No. Lenders regularly fund acquisitions secured over the business itself, usually with a personal guarantee. Property changes the price of the debt, the term, and how much of the purchase price a lender will cover.
Do you need property to buy a business? →
Can the vendor carry part of the price? Often, though the form matters. Banks are reluctant to share security with a vendor. What works is deferred consideration or an earn-out that sits behind the bank debt.
Where does the rest of the equity come from? Cash-flow lending typically covers around 50% to 70% of the price. More buyers are filling the gap with equity partners, family or friends, and it pays to structure that early, because the lender will want to know who owns what from day one.
Business property lending hit a record while households pulled back
Businesses committed a record $27.2 billion to buying property in the June quarter, 18.9% more than a year earlier, while new home loan commitments fell 5.2%. Bendigo and Adelaide Bank's results show the same tilt, with business lending up 12.5% against 1.5% overall. If you're weighing your own premises, lender appetite is there.
Australia ETA Community
If you're exploring business acquisition in Australia, the Melbourne ETA community is a good place to start. Resources, upcoming events, and connections all in one place. Explore the community.
Want to talk through your position?
If you're working on an acquisition, a commercial property purchase, or a facility worth reviewing after this rise, get in touch. Replies come back within one business day.
The information in this article is general in nature and does not constitute financial advice. Please consider whether it is appropriate for your circumstances before acting on it. Jonathan Chan is a Credit Representative (Number 559372) of Finsure Finance and Insurance Pty Ltd (Australian Credit Licence 384704).