Bank Loan question

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Forums › Finance and wealth management › Bank Loan question

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eracode

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#2258178 14-Jun-2019 13:49

networkn:

sen8or:

Unfortunately, the "golden rule" with banks applies, he who holds the gold, makes the rules.

Banks are entitled to assess a borrowers ability to repay a debt, be that from a wage / salaried worker or company or anything in between. The financial strength of the company that you own is directly relevant to your ability to meet repayments. Whilst you may draw wages / salary by the means of a normal salaried employee, the relationship is not arms length and you could make the figure read anything that you like, whether or not the company has the capacity to sustain that figure.

Frustrating no doubt, but with the amount of noise being made in the media about irresponsible lending, loan sharks preying on the vulnerable and IIRC even the Aussie banks being held to task about dodgy lending practices, its no surprise that banks are tightening up on their processes.

Sure, but with a 20 year period of time where the company in question has been incorporated, and the salary being paid monthly and for at least 10 years of that, into said banks bank account, no company could sustain that if it wasn't solvent.

I could understand it in a company where a salary had been paid for just a few months...

The issue I had that was more frustrating, was the suggestion of the extended information that said they would require. If it's just them, then I'd consider switching banks, if everyone was going to require it, then I do wonder how anyone who owns a company ever manages to borrow money if they are in complex business situations.

The reality is that in your situation you are the company and the company is you.

Complex situations result in more scrutiny.

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networkn

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#2258206 14-Jun-2019 14:30

It's not really that complex. There are Tens of thousands of businesses in NZ where that is true, and therefore I'd expect the NZ banking industry should understand this and have a mechanism for dealing with it simply.

frankv

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#2258224 14-Jun-2019 14:47

eracode:

Benjip:

Welcome to the world of attempting to get finance for anything when you're not a run-of-the-mill salaried employee.

I'm in the same boat as you (but with ASB) and it's always a nightmare getting the right paperwork to do basically anything in terms of lending.

Could you perhaps go to a different bank or provider for the small loan and apply as just a salaried employee? Unless your business name is the same as your personal name, surely it's just as if you were working for any registered company and being paid a weekly/monthly salary (with pay slips)?

.... except that approach would be less than 'full and open disclosure' and would land in him deeper strife with any bank if/when they find out. There are all sorts of fishhooks with this approach.

It's only a problem if there's a problem. So long as you pay back the loan as agreed, no problem.

My view is that if you're personally guaranteeing the loan, then your LLC's financials are none of their concern. They could legitimately ask about your financial commitments, and you would have to disclose any capital you're putting into the company from your salary. It's not for your benefit. Banks only do things for your benefit if the law forces them to.

I'd give them the choice of your business on your terms, or you'll go elsewhere.

networkn

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#2258226 14-Jun-2019 14:54

frankv:

I'd give them the choice of your business on your terms, or you'll go elsewhere.

Which is the point of this thread. I am trying to determine if there are hard and set rules and around this stuff, or my bank is being overly intrusive. If I can't do better elsewhere, then there is no point in switching, but if they are being difficult and there are other "business" friendly banks around, that won't penalize me for being in business, then that is worth knowing about.

I don't NEED the loan, it's a cashflow convenience thing, and I don't have anything to hide, but I have an issue of being asked to provide things that fall outside of reasonable.

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#2258228 14-Jun-2019 15:00

I believe the banks have had the hard word from the Reserve Bank to tighten their procedures and to increase their equity and debt management. I would say this is part of that even if it is based on the presented scenario a pain in the butt and somewhat illogical.

eracode

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#2258240 14-Jun-2019 15:10

networkn:

frankv:

I'd give them the choice of your business on your terms, or you'll go elsewhere.

Which is the point of this thread. I am trying to determine if there are hard and set rules and around this stuff, or my bank is being overly intrusive. If I can't do better elsewhere, then there is no point in switching, but if they are being difficult and there are other "business" friendly banks around, that won't penalize me for being in business, then that is worth knowing about.

I don't NEED the loan, it's a cashflow convenience thing, and I don't have anything to hide, but I have an issue of being asked to provide things that fall outside of reasonable.

Why don't you go and talk to another bank and see what they say? No-one here is able to properly answer your questions because we don't know your full personal situation.

You might be pleasantly surprised by another bank. Or you may find that complying with what your current bank wants is less hassle than starting from scratch with a different bank.

Sometimes I just sit and think. Other times I just sit.

eracode

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#2258249 14-Jun-2019 15:17

xpd:

I've obtained personal loans from ANZ with no issues (dont think they even asked if I was a director/owner of anything, just long as the funds came in to cover the loan), and I'm the part owner in a company. Does seem a bit extreme.

The point is, we don't know OP's full personal financial situation or the postion of the company. Yours and his could be very different > different response from bank.

Sometimes I just sit and think. Other times I just sit.

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Geektastic

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#2258327 14-Jun-2019 16:34

We certainly had to provide company accounts for our mortgage application even though my wife and I are the only shareholders. We aren't PAYE employed though.

It has nowt to do with "protecting" you, of course.

MikeB4

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#2258331 14-Jun-2019 16:38

Geektastic: We certainly had to provide company accounts for our mortgage application even though my wife and I are the only shareholders. We aren't PAYE employed though.

It has nowt to do with "protecting" you, of course.

"nowt" ??????

Any how it's about protecting the bank and sort of, kind of in a round about way "protecting you" if one was to apply a liberal interpretation of that.

Aredwood

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#2258504 14-Jun-2019 20:45

Just borrow the money using credit cards. Last time I checked, personal loan interest rates were around 14% So not much lower than credit card interest rates.

And personal loans often have large application / drawdown fees. Credit cards might still be cheaper. Especially if the borrowing is only short term.

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#2259036 16-Jun-2019 10:02

networkn:

Sure, but with a 20 year period of time where the company in question has been incorporated, and the salary being paid monthly and for at least 10 years of that, into said banks bank account, no company could sustain that if it wasn't solvent.

I could understand it in a company where a salary had been paid for just a few months...

The issue I had that was more frustrating, was the suggestion of the extended information that said they would require. If it's just them, then I'd consider switching banks, if everyone was going to require it, then I do wonder how anyone who owns a company ever manages to borrow money if they are in complex business situations.

It's really only the last 2-3 years which are of interest. Plenty of business have been around for years and years but then gone out of business.

invisibleman18

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#2259395 17-Jun-2019 11:15

Sorry to hijack thread, but didn't want to start a new one. A minor issue I've found with something like this recently is trying to define my residential status. I moved in with my partner who already owned her house earlier this year so I'm not "renting" anymore and obviously not "flatting." Closest is "boarding" as the house is owner occupied and I'm paying a share of "rent" (i.e. a share of the fortnightly mortgage payment), but I'm obviously not renting a separate room, and all the living expenses are shared etc. There's no option to describe this on any form. Can't be that uncommon for one partner to have owned the house prior to the relationship, but do I just say boarding and go into more detail if I get a chance to add explanation?

eracode

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#2264970 26-Jun-2019 13:10

@networkn Interested to know how this panned out and what you ended up doing.

Sometimes I just sit and think. Other times I just sit.

networkn

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#2264972 26-Jun-2019 13:14

eracode:

@networkn Interested to know how this panned out and what you ended up doing.

I have done nothing right now, got busy with other things, but the answers aren't clear whether my bank is expecting more than other banks and are lying that the RBNZ requires this level of interrogation, and I had hoped to avoid interacting with another bank to determine it as it's very time consuming.

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