How much can I borrow?
Typically, lenders will apply one of two gearing calculations to management rights funding :
Unit value x gearing ratio – usually 80%
Management Rights Value x gearing ratio – usually 65%
Or
Unit and Management Rights Combined Value x 65% to 75% gearing.
Experience suggests (when borrowing for management rights) that working on an “all up” gearing ratio of around 70% is a good place to start. As an example the calculation then looks like this :
- Unit Value $400,000
- Management Rights Value $700,000
- Costs (say 5%) $55,000
- Total Required $1,155,000
- Less $385,000 deposit + costs
- Loan Amount $770,000 being 70% of the combined purchase price
Of course, gearing is only one part of the equation. Lenders are just as interested in the quality of the asset, the borrower’s previous work experience and the capacity of the asset to service debt. In particular most experienced management rights lenders will consider the following issues when assessing a loan :
- Balance term of the agreements (including options)
- Sustainable net profit
- Future prospects or upside
- Debt Servicing Capacity
- Opportunities to increase net profit
- Composition of the letting pool
- Operating business model
- Legislative Risk
- Economic Trends and Drivers
- Qualifications of the intending purchaser
Before your application is presented to a prospective lender we will go through a thorough assessment with you. Our service ensures that your application is presented in the best possible light. Intending new entrants to the industry should not be deterred by not having had a management rights previously. In most situations “life experience” and an ability to communicate effectively are the most important qualifications.
Finance Brokers vs Banks: A Smarter Approach to Lending
Mike Phipps Finance was recently featured on the ResortBrokers RB Radio podcast, where Paul Grant and Cameron Wicking discussed the rising demand for finance brokers in both home and commercial lending. With access to multiple lenders and a personalised approach, brokers are helping clients secure better outcomes and navigate complex finance with greater confidence.
Watch the full video to learn how finance brokers are changing the game.
Finance Brokers vs Banks: A Smarter Approach to Lending
Mike Phipps Finance was recently featured on the ResortBrokers RB Radio podcast, where Paul Grant and Cameron Wicking discussed the rising demand for finance brokers in both home and commercial lending. With access to multiple lenders and a personalised approach, brokers are helping clients secure better outcomes and navigate complex finance with greater confidence.
Watch the full video to learn how finance brokers are changing the game.
Better service starts here
” Your communication and commitment with your clients is second to none. The Mike Phipps Finance team have helped us follow our dream.”
Kim and Anthony Plackett
“We highly recommend Mike Phipps Finance to people like us who are investing and buying a small business. ”
David Addenbrooke & Keith Bellis
“I was truly impressed and very thankful for their help. I just wanted to let you know what great staff you have – although I am sure you already know.”
Jacqueline Holster
Management Rights Buyer