Does Bank look at Share holders to be Guarantors aswell

Discussion in 'Loans & Mortgage Brokers' started by dev_melb08, 14th Jun, 2017.

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  1. dev_melb08

    dev_melb08 Well-Known Member

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    I am looking at few structures with business partners to get in to development projects to construct townhouses. If I have a company with me as director and business partner as Shareholder, will the bank/financial institution :
    1. Assess both of us for Serviceability ?
    2. Will they look at both of us being guarantor of the loan ?
    Reason I ask is, we want to trigger two projects and have enough equity and serviceability to do so, but if both us become guarantor on first loan, we will be stuck with the first project to its completion which will be couple of years.
    Intention is that for first one I take the loan with partner being shareholder and vice versa for second one. Is this the right way to it ? Looking at ways to over come this hurdle in right way :).. Any ideas from Lending Guru's.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Depends, in many cases they will want a guarantee from shareholders. But it might depend on the percentage of ownership and how the deal is structured.

    This is easily structured so that you can avoid a guarantee if necessary.
     
  3. dev_melb08

    dev_melb08 Well-Known Member

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    Is there a better way to do this i.e. Project 1 with loan under my name but my partner has his shares and Project 2 vice versa ? I am thinking of options to ensure our structuring does not become a hurdle for growing 2 projects or more, limited by banks not offering loan.
     
  4. Ross Forrester

    Ross Forrester Well-Known Member

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    They will always ask - it does not mean you have to give it.

    A lot of lenders will lend without shareholder guarantees if the borrower is strong enough.

    A good broker helps this way.
     
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes there is a better way of doing it - but not like you describe.
     
  6. Industrious

    Industrious New Member

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    Hmm.. Interesting question. I am facing similar issue.
    Terry_w, I have read lot of your posts specially the "legal Tips", love them. What's your view on this, as to how to structure this properly to get best of both world ?
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I know nothing about your or your situation so cannot advise on how you should structure. Get some proper legal advice.
     
    tobe likes this.

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