Macquarie Business Banking Commercial Lending Guide. Banking solutions to help grow your client s business. macquarie.com/commercialbroker

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1 Macquarie Business Banking Commercial Lending Guide Banking solutions to help grow your client s business 1 macquarie.com/commercialbroker

2 Why choose Macquarie? With Macquarie s specialist understanding of broker finance for small businesses, we bring a unique perspective across a number of industries. Combine this with our committed team of BDMs, market and industry specific knowledge including benchmarking insights, Macquarie provides strategic insights at every stage of the business lifecycle. Whether you re looking to help your clients grow their business, refinance, or acquire a new premise, we ve got smart finance solutions to help them evolve to achieve their business goals. At Macquarie, we bring a unique professional services culture to banking and financial services. We focus on the overall performance of your business, providing you with financial tools and solutions to help you achieve goals for you and your clients. Our flexible approach and can do attitude helps you put a tailored plan in place. Macquarie can help you focus on the things that matter most to you and your clients. Macquarie provides banking and business services to clients in a number of core industry segments including strata, residential and commercial real estate, insurance broking, financial planning, built, legal and accounting. Each client has a dedicated relationship manager who understands the dynamics and constraints of their industry. We work closely with our clients to find innovative ways to address their challenges and grow their businesses. This includes providing them with tailor-made deposit, lending and payment solutions, diagnostic tools to identify efficiencies, benchmarking data and industry-specific networking events. Speak to a Macquarie broker BDM today for specific details on our commercial finance offering: NSW Kevin Treanor Daniel Cherrie QLD Bill Mauger VIC Rhys Chapman SA Adam Trengove WA Patrick Holden National Kevin Treanor macquarie.com/commercialbroker 2

3 NEW CLIENT CHECKLIST The following checklist gives you a guide on the information required for all new client applications. 1 Provide the following documentation to refer a new client Items required for initial enquiry submission: Funding enquiry form* Statement of position form* An confirming the applicants clear tax position and no known statutory liabilities Financial statements / Income tax returns (past two years of accountant prepared statements and returns) Privacy consent form.* Additional items required to progress with a formal application: Customer identification form (CIP forms, can be individual, company, trust, partnerships)* Clear tax certification letter provided by your client s accountant* Specific industry data required for professional services firms (Your BDM will advise what industry specific information is required) SMSF borrowing requires additional information, including certified trust deeds (Your BDM will advise). The Macquarie Commercial Loans tools and resources list can be found at macquarie.com/commercialbroker * (available online from the Macquarie Commercial Loans tools and resources list) 2 the completed forms and supporting documentation to your Macquarie broker BDM. All lending applications are subject to Macquarie s credit criteria and due diligence process. 3

4 INDUSTRY OVERVIEW Initial due diligence information All industries require Company Financials and Statement of Position for the directors/partners Qualifying criteria Other criteria may apply Maximum LVR Interest Only (IO) Terms Valuation MBL internal valuation completed Financial Planning by both investment and risk upfront / recurring income. Details of AFSL (licence holder). a) Minimum recurring revenue of $250k. a) For recurring revenue $1m, up to 60% of asset value amortising b) For recurring revenue >$1m, up to 3x EBITDA*. May be considered: a) For recurring revenue $1m, up to 3 years IO if 60% LVR b) For recurring revenue >$1m: up to 3 years IO if 3x EBITDA* IO ongoing if 2.5x EBITDA*. Based on multiple of investment and risk recurring revenue and/or multiple of EBITDA*. Real Estate by sales commissions, property commissions and other. Rent roll statistics from property software. a) Trust account audit with no adverse findings b) Able to demonstrate servicing based on decline in variable revenue streams Up to a maximum of 70% of rent roll value and must amortise to 60% within 3 years. May be considered: a) Up to 12 months IO if 65% LVR b) Ongoing IO where 60% LVR The valuation is based on a multiple of recurring property fees subject to location and characteristics of the property portfolio. Strata by base fees, insurance and other. The number of lots and buildings under from strata software. No more than 10% revenue attributable to one building. a) Where lots under 5,000, up to a maximum of 70% of strata roll value and must amortise to 60% within 3 years. b) Where lots under >5,000, up to 4.5x EBITDA*. Up to 12 months may be considered where: a) For lots under 5,000, up to 65% of strata roll value b) For lots under >5,000, up to 4x EBITDA*. Strata roll value based on recurring base contracted fees dependent on location and/or multiple of EBITDA*. Insurance Broking by fee & commission, premium funding and other. Top 10 clients by revenue. GWP split by policy class and underwriter from insurance broking software. a) Trust account audit with no adverse findings b) Minimum recurring revenue of $500k c) Preference for 2 or more directors (key person risk to be assessed for 1 directors) a) For recurring revenue $750k, up to 67% of asset value amortising b) For recurring revenue >$750k, up to 3.75x EBITDA*. May be considered: a) For recurring revenue $750k, up to 3 years IO if 60% LVR b) For recurring revenue >$750k: up to 3 years IO if 3x EBITDA* IO ongoing if 2.5x EBITDA*. Based on multiple of commission recurring revenue and/or multiple of EBITDA*. * EBITDA (after market princpal s salary) 4

5 INDUSTRY OVERVIEW Initial due diligence information All industries require Company Financials and Statement of Position for the directors/partners Qualifying criteria Other criteria may apply Maximum LVR Interest Only (IO) Terms Valuation MBL internal valuation completed Accounting by business type and by corporate clients versus personal clients. Top 20 clients by revenue. a) No more than 40% of revenue dervied from personal income tax returns b) Preference for 3 or more partners/ directors (key person risk and/or property security may be required for 1-2 partners/ directors) Up to 3x EBITDA* or 70% of recurring fees. May be considered where up to 2.5x EBITDA*. Based on recurring fee revenue and/or multiple of EBITDA*. Legal Split of revenue by area of practice and by each partner. Aged debtors and Work-in-Progress from practice software. Preference for 2 or more partners (property security will be required for sole practitioners). For 2 partners, up to 1x stablised earnings per partner (capped at $500k per partner) For 3 partners, up to 1x stabilised earnings per partner (capped at $1m per partner) May be considered for term debt only: For 2 partners, up to 1 year IO before transitioning to 10 years amortising. For 3+ partners a) IO up to 2 years for $750k per guarantor b) IO ongoing for $100k per guarantor Based on stabilised earnings and/or partners position. Medical Last 2 years personal and/or business tax returns. NOTE: For medical practice goodwill lending, please contact your Macquarie Commercial Broker BDM. Must be in active employment for >2 years. Must be a GP or Medical / Dental specialist as defined by the Medical/ Dental board of Australia. a) Up to 1x net income from personal exertion b) Up to $750k for medical and dental specialists c) Up to $250k for GPs May be considered up to a max of 5 years. Based on taxable revenue. Built Environment (NOTE: Incl. Engineer, Architect, Planner, Surveyor, Other White Collar Fee for Service in Built Environment) Aged debtors and breakdown of income by discipline (if appropriate). Top 10 clients by revenue. Preference for 2 or more partners/ directors (key person risk and/or property security will be required for 1 partner/ director). 1. Where Debt / EBITDA* is <1.50x the maximum lending of $1m per guarantor; 2. Where Debt / EBITDA* is x maximum lending of $750k per guarantors; 3. Where Debt / EBITDA* is between x maximum lending of $500k per guarantor. May be considered up to a maximum of 2 years, with all term debt to be repaid over a maximum of ten years. Based on a multiple of recurring EBITDA* (after principals salaries). * EBITDA (after market princpal s salary) 5

6 Industry Lending Macquarie Bank offers these products to the industries we bank. Fully Drawn Advance Revolving Line of Credit Overdraft 1 Financing solution for business growth and development Redrawable short to medium term working capital for business activities Short term finance for business expenses Max. loan term 5 years 2 5 years On Demand Min. loan size $500,000 $500,000 $50,000 Borrowers Individual, Company, Partnership, Trust Company, Partnership, Trust Company, Partnership, Trust Security 3 Property, Business Assets Property, Business Assets Property, Business Assets Max. LVR 4 Refer to Industry Guide Principal & interest Principal + interest Interest only 5 Interest capitalisation Features Global facility limit Redraw Offset account Sub-accounts 6 Fees & charges Establishment fee 7 0.5% of limit 0.5% of limit 0.5% of limit Line fee Ongoing fees 1 Not provided on a standalone basis, only available as part of full banking relationship. Interest paid on funds drawn only. 2 Term can be extended up to 10 years subject to loan purpose, security and borrower type. 3 Business Assets include rent roll, strata roll, goodwill, stock, debtors and WIP. 4 Dependent on location and value of security. 5 Maximum Interest Only loan term of 5 years, subject to credit approval. 6 All sub-accounts are required to be on the same interest rate and repayment type. 7 Other additional fees and charges may apply. Please refer to the Estimate of Costs which will be issued with the loan documents 6

7 Property Lending Macquarie Bank offers these products to the industries we bank. Macquarie Property Versatile 8 CommOne Commercial SMSF 9 Flexible residentially secured loan for more complex borrowing structures Loan product targeted at business clients to purchase commercial property Facilitates clients purchasing commercial property within their SMSF Max. loan term 30 years 5 years 5 Years Min. loan size $500,000 $500,000 $500,000 Borrowers Individual, Company, Partnership, Trust Company, Partnership, Trust Corporate Trustee (SMSF) Security Residential Property Commercial Property Commercial Property Max. LVR 4 80% 70% 70% Principal & interest Principal + interest Interest only 5 Interest capitalisation Features Global facility limit Redraw Offset account Sub-accounts 6 Fees & charges Establishment fee 7 Individual: $1,000 Corporate Borrowers: 0.5% of limit 0.5% of limit $1,400 plus 0.50% of loan amount over $200,000 Line fee Ongoing fees $30/month $30/month 8 Residentially secured loan for business and investment purpose. Must be >50% business purpose or coupled with business lending. 9 Beneficiaries of SMSF need to operate within an industry covered in this guide (refer to pages 4 and 5). 7

8 This information has been prepared by Macquarie Bank Limited ABN AFSL & Australian Credit Licence ( Macquarie ) for general information purposes only, without taking into account the objectives, financial situation or needs of any individual or entity. All lending applications are subject to Macquarie s credit criteria and due diligence processes. 11/2017 8