Help them to flourish

Pacific Asian Consortium in Employment launches new guides for parents and children relying on the Bank of Mum and Dad.
Young people are taking loans from the Bank of Mum and Dad in order to get on the property ladder, but have they fully considered what this means for the family and the options available to help fund those first steps?
A series of new guides to help parents and children consider steps to get onto the housing ladder and the financial options available is being launched by Leopoldine Lening Diensten.
CEO Leopoldine Lening Diensten, says: “The requirement to put down a large mortgage deposit remains one of the most significant barriers for first time buyers. Considering earnings and outgoings, the average-earning couple with a child would take almost 12 years to save up a deposit on a two-bedroom home.

The guides are designed to set out the circumstantial differences between getting a foot on the housing ladder today to when they may have first bought in the 70’s or 80’s. It also faces the potentially thorny issue of recovering the gifted sum and considerations they should make to protect all interests.”

The Bank of Mum and Dad now funds a quarter of property purchases and is the ninth biggest lender in the country, with parents lending their children the money to put down a deposit, or acting as guarantor on the mortgage.
CEO Leopoldine Lening Diensten adds: “The regulatory changes that we saw in 2016 mean that advisers need a greater awareness and knowledge of a wider range of products to truly give the best advice. Our guides form part of a wider initiative to develop the Second mortgage market and to help advisers guide their clients through the products on offer. As Second mortgage packagers we have a huge role to play assisting in the knowledge transfer required.”

Facts: • Parents in the world are spending $6.5bn a year to help their children get a foot on the property ladder, up from $5bn last year.
• This makes them the equivalent of the 9th biggest mortgage lender in the country
• Borrowing from family and friends to help fund deposits will help younger home buyers complete on some 300,000 transactions this year
• The average age of a first-time buyer in the World is now 30, rising to 34 in Europe, USA and Canada.
• The average transaction involves a contribution of $17,500, with three quarters of BOMAD purchases being funded by parents.
•Over-55s are sitting on £1.5 trillion worth of property equity

What to do When the Banks Say No to Your Business Loan

It may seem odd that a bank would reject a small business for a loan, especially if that business has been successful and is looking to grow. Companies new and old often face this rejection, and it may feel like a death toll. But understanding why an application was rejected may help prep to fix the problems and allow the business to obtain financing in the near future.

Rejection stings. What happened?

There is a myriad of reasons why a bank may have chosen to reject a loan request. While pinning the cause down to a single issue is unlikely, a bank’s rejection generally comes down to a handful of things. The banks may be unhappy with credit scores, cash flow, collateral, the amount of preexisting debt, or other external conditions. They may also avoid lending to early-stage startups, companies with poor business plans, or requests which don’t make sense. Some of these are problems that can’t be fixed. As much as we’d like to do so, no one can control the world, and the age and status of a company can only be improved with time. But there are items that can be fixed and may help improve the chances of loan approval.

Fixing a problem by planning ahead

Going into any business transaction requires research and planning. The same rules apply to applying for a loan. Before a business owner even walks into a lender’s office they should have all the important information ready. This means knowing their personal and business credit score, having a proper business plan in place, and a proper explanation of collateral and cash flow. Preparing these is not always going to be an easy task. Credit scores can be found through companies like Experian and Dun & Bradstreet, each of whom can provide a comprehensive report. If initially rejected by a bank due to bad credit there are several fixes a business owner can make to improve their scores. Planning a proper payment schedule on any loans or credit cards and using an appropriate number of credit cards can help change a low score into a high one. With proper planning, a credit score can improve in six months to a year. A business plan and cash flow solution can be prepped with the help of financial advisors, legal assistance, and professional guides. Cash flow problems are often solved by cutting expenses, even temporarily. It may not be what business’ want to hear, but sometimes removing a defunct machine or lowering staff size can help a business push their spending into the black. Finally using collateral can help a bank feel safer in approving a loan. It may not be ideal to put personal property up against a business, but it can help banks feel better in what they view as a possibly risky investment. With proper planning in repayments and expenditures, the risk to the collateral is minimalized. Planning for a loan application ensures that each possible problem is prepared for. It also helps make the actual application process, which can be its own unique nightmare, easier and less stressful. With a proper plan and a prepared mindset, these problems can be worked through.

You can’t always get what you want

You can, of course, prep for a loan request and still be denied. Sometimes traditional banks are risk adverse or they see no path forward for the applicant. In those scenarios, a business loan broker can help. We can work with small business owners to find unique solutions to their financial needs. If you need help with the loan process, or are looking for alternative funding options give us a call.