How Much Money Can You Borrow?
The first step before you start hunting around for your childcare centre investment is to get a good understanding of how much you can borrow. I am assuming you probably will need to borrow so you will need to approach your bank and perhaps one or two other banks to get an idea of your capacity to borrow. Generally, they are more willing to lend on a childcare building (the freehold) than a business. For a small childcare business under $350,000, we have found the banks are not interested in lending as it is too small a loan and to obtain money for a small business you would need other collateral such as an investment property or equity in your house to borrow against. You need to discuss these options with your bank. You may have a good relationship with your bank, particularly if you have a business manager who can steer you in the right direction. However, do not be afraid to shop around different banks as the bank’s lending policy on various types of businesses and multiple classes of assets are constantly changing, and your bank may not offer the best deal or be particularly interested. The alternative to going to a bank is to use a finance broker. Many sophisticated borrowers use a finance broker as they can often obtain the best rate, terms, and conditions for a mortgage for your childcare acquisition. What we recommend you do NOT do is apply to 1 or more banks yourself before approaching a finance broker. Each time you apply to a bank it is recorded on your centralised credit file. It will not help your case if you have already been refused by one or more banks!
Good luck and happy hunting with finance.
