14 Mar 2024 Podcast: Deep Dive – Understanding Secured vs Unsecured Commercial Lending with Jack Talbot from Leverage Capital
Today we talk commercial lending with Jack Talbot, Director at Leverage Capital.
With experience at Bank of Melbourne and Liberty, Jack ventured into entrepreneurship almost four years ago, focusing on aiding business and self-employed clients.
Whether you’re experienced or new to business financing, gain insights into navigating commercial finance.
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You Have My Interest is brought to you by Everlend, a mortgage and finance broking firm built for the purpose of educating and empowering you to make informed financial decisions tailored to your wealth goals. Find out more and book in your free initial consultation at https://www.everlend.com.au/
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Podcast produced with Apiro
Please find a Podcast summary below with the interview highlights:
Host: Evelyn Clarke, Director and Finance Broker at Everland
Guest: Jack Talbot, Director at Leverage Capital
Evelyn Clarke interviews Jack Talbot to delve into the world of commercial lending, particularly working capital solutions. Jack, with experience in Bank of Melbourne, Liberty, and now as the founder of Leverage Capital, provides insights into helping self-employed and business clients access tailored financial solutions.
Key Points Discussed:
What is Commercial Lending?
- Broad category encompassing multiple areas, including:
- Property Financing: Similar to residential loans but for commercial properties.
- Working Capital Solutions: Tools like overdrafts, invoice financing, or term loans to manage cash flow gaps and support growth.
- Invoice Discounting: A method to close cash flow gaps caused by long payment cycles, enabling businesses to reinvest faster.
Specialisation in Self-Employed Clients
- Self-employed borrowers often face challenges due to their complex financial structures.
- Jack’s approach includes a holistic review, leveraging personal and business assets for efficient lending solutions.
The Importance of Cash Flow in Business
- Cash flow is often a top concern for businesses, particularly those dealing with inventory.
- Solutions like working capital facilities can help businesses manage cycles of purchasing, storing, and selling stock.
- Poorly structured loans or using the wrong facilities can increase costs and stress cash flow unnecessarily.
Secured vs. Unsecured Lending
- Secured Lending: Backed by property or assets, offering lower interest rates and longer terms.
- Unsecured Lending: Accessible but often short-term and higher-cost, suitable for businesses addressing specific cash flow gaps.
The Role of a Specialist Broker
- Brokers with expertise in commercial lending can structure loans effectively, reducing costs and improving financial outcomes.
- Missteps in loan structuring can lead to inefficiencies, higher rates, and financial strain.
Challenges with Unsecured Lending
- While quick and flexible, unsecured loans may perpetuate issues if used by businesses with profitability problems rather than temporary cash flow gaps.
- Businesses are encouraged to assess their financial situation carefully before opting for such facilities.
Ongoing Reviews and Support
- Commercial lending requires ongoing reviews to adapt to changing business needs.
- Regular check-ins (at least annually) ensure the lending structure aligns with evolving goals and market conditions.
Practical Advice for Business Owners:
- Understand Your Needs: Separate cash flow challenges from profitability issues to avoid misusing debt.
- Leverage Specialist Expertise: Work with brokers who specialise in your business type or financial needs.
- Plan Ahead: Regularly reassess financial strategies and lending structures to remain bankable and efficient.
- Build Long-Term Relationships: A strong connection with a knowledgeable broker ensures advice is tailored to your growth journey.