23 Jan A Better INTEREST RATE for Everyone
Saving the world one business at a time is long game.
It is little known or even harder to digest that just about every business owner with material borrowings, either agribusiness or commercial, can harness better rates. But the journey of HOW is the most difficult. Sub optimal rates for borrowers is a confluence of four major economic forces;
- Lenders are mandated to maximise revenue for their shareholders
- Lenders hold back their Intellectual Property on how pricing is obtained in the commercial lending stratosphere
- Borrowers do not have the time to learn what Lenders are looking for. (It takes bankers many years to learn it themselves)
- Borrowers fail to present their business in the most optimal format to attract the best rates
Our effort to achieve 3.33% for our client was a process that bridged the knowledge gap and procured what was attainable in the market for his business.
If curiosity prevails, some high-level characteristics of the business were as follows
How was 3.33% achieved?
- Single enterprise: beef grazing
- Sizable balance sheet (and growing by leveraged appreciation of the assets)
- Strong historical financial performance
- Improving financial projected performance (underpinned by domestic fundamentals)
- Excellent management and financial discipline with an exceptional low cost production system
- They were willing to refinance (if it came to that), to capture the economic benefits for their business
- (note: based on a variable rate, benchmarked off monthly BBSY)
The borrower also recognised that the banking landscape was evolving, and that their expertise was in beef production, not banking. By reaching out and bringing this expertise into their business enabled them to focus on their business whilst market intelligence was obtained so that a well-informed decision was made on their banking arrangements.
This is just one example of many. We are open for discussion if you too want to participate in what is rightfully yours.