How to Organise Residential, Business and/or Commercial Finance
In the current tough financial environment it is even more important than ever to make sure that finance structures are set up correctly to not only obtain the best financial advantage, but also to asset protect, and provide flexibility into the future.
Purchasing a residential property
The ownership and finance structure to purchase residential property is very important. Once the property has been purchased, and settles the ownership details remain set in stone until the sale or transfer of the property - to a spouse, a third party or another related entity. This can be costly, as a change in ownership can trigger stamp duty expenses, along with potential capital gains issues. Spousal transfer(from one partner to the other) is an effective way to change ownership and to asset protect and not incur these large transfer fees. Another strong consideration is to finance the purchase separate to other assets - to make the property "stand alone", therefore eliminating a cross secured position. This is especially the case where business owners and commercial property is involved.
Purchasing a business
It is common for business owners to purchase a business in a different entity to that of their freehold ownership entity, and their residential ownership entity. Business does open up litigation issues, so therefore it is very important that when transacting, try to separate from freehold ownership. When financing the aim is to protect as many assets as possible, by limiting the security provided.
Purchasing a commercial property
Setting up a family trust is a common way to purchase commercial property, which allows great flexibility and asset protection. Financing when the property is owned by a trust or company can cause some issues with finance - especially where a unit trust is involved, and where there are partnerships involved. Specialist advice from solicitors, accountants and financiers is vital to make sure this process is completed to a satisfactory standard.
The final issue to consider in obtaining the most suitable finance in purchasing a business, commercial property, or residential property is the terms of the loan. Interest rates need to be considered, along with entry fees, ongoing fees, and exit fees given termination of the loan. The loan term must be considered, and features of the loan such as redraw, extra repayments, interest only periods, and portability of the loan need to be considered. As a professional business here at GFG, we can not stress enough the correct advice in obtaining the most appropriate finance package. If we can assist please call our office here in Torquay, or Geelong for further assistance.
Simon Sutterby
Commercial and Investment Finance Manager
For further advice on Commercial Finance, phone Simon Sutterby.
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