PJT Accountants

Increase in Lending Costs for Hotels

17 March 10

 

At a QHA meeting it was discussed that Banks are using all resources to increase their client's bank interest rates.

As you would all realise, business loan rates have not decreased at the rate of house loans.

The banks have described the reason for this, as the cost of accessing finance from Australia and overseas. Three years ago, banks were accessing finance at 0.2% and now some are paying over 2% for similar finance.

As you would understand banks are then making a loss if your margin is less than 2%. In the past they may have charged a 1.5% margin and made a profit of 1.3% on funds based upon finance costs to banks being 0.2% above RBA rates.

Things that allow banks to change rates are:

  • Bank Valuation clauses in Finance Letter of Offer
  • Requirement of clients to give quarterly accounts to banks, and the clients not providing this.
  • Requirement of clients to have interest to net profit ratio at certain rate, however client has not maintained this. For example, banks now require that your net profit is at least 2 times the interest expense.

 

Banks will endeavour to rely upon non performance to raise their margin above RBA rates.

If you would like an obligation free assessment of your finance needs, please give us a call and we will arrange an appointment with you.

 

 

Wayne Patten

PJT Accountants & Business Advisors
(07) 5413 9300
www.pjtaccountants.com.au

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