Commercial finance, term by term.
The language lenders, valuers and solicitors use, defined the way it applies to business-purpose lending in Australia. Each entry links to the loan types where the term matters.
Alt-doc
What alt-doc lending means, how it differs from low-doc, and what documents typically substitute for full financials.
As-if-complete valuation
What an as-if-complete valuation means, and how it's used alongside cost to test a development's loan to value ratio.
ATO payment plan
What an ATO payment plan is, how it compares with refinancing the debt, and why lenders ask if one has lapsed.
Balloon payment
What a balloon payment is, how it lowers regular repayments, and what a borrower needs to plan for at the end of the term.
Bare trust
What a bare trust is in an SMSF borrowing arrangement, and why the property is held in it rather than directly by the fund.
Bridging
What bridging finance is, how it differs from a caveat loan, and what makes a bridging exit credible to a lender.
Building approval (BA)
What a building approval (BA) is, how it follows a development approval, and why lenders check for it before construction drawdowns.
Business activity statement (BAS)
What a BAS is, and why recent statements are a standard document lenders request for low-doc and ATO-related lending.
Capitalisation rate (cap rate)
What a capitalisation rate is, how it's used to value income-producing property, and why lenders watch cap rate movements.
Capitalised interest
What capitalised interest means, how it changes a facility's balance over time, and why it suits projects with no interim income.
Caveat
What a caveat is, how a caveat loan differs from a registered mortgage, and what lodging one over a property actually does.
Chattel mortgage
What a chattel mortgage is, how ownership works during the loan, and why it's a common structure for equipment finance.
Conditions precedent
What conditions precedent are, and why they must be satisfied before a facility settles rather than afterwards.
Conditions subsequent
What conditions subsequent are, how they differ from conditions precedent, and what happens if they're not met on time.
Credit approval
What credit approval means, how it differs from indicative terms, and what typically still stands between approval and settlement.
Debt service coverage ratio (DSCR)
What DSCR measures, how it's calculated, and why lenders on income-producing property watch it more closely than ICR alone.
Deed of priority
What a deed of priority is, why lenders sign one when more than one facility sits over the same security, and what it settles.
Default interest
What default interest is, when it's applied, and why it makes an achievable exit more important than ever near maturity.
Development approval (DA)
What a development approval (DA) is, why lenders treat "DA pending" differently from "DA approved," and how it shapes land bank lending.
Director penalty notice (DPN)
What a director penalty notice (DPN) is, why the deadline matters, and how refinance finance is used to respond to one.
Discharged bankrupt
What "discharged bankrupt" means, how it affects access to finance, and what lenders in this space typically want to see.
Drawdown
What a drawdown is, how staged drawdowns work on a construction facility, and how they differ from a revolving line of credit.
Englobo land
What englobo land is, why it's valued differently from titled lots, and what a lender looks at before financing it.
Establishment fee
What an establishment fee covers, how it's typically charged, and what to check before comparing it across lenders.
Exit fee
What an exit fee is, when lenders charge one, and how it should be checked against the facility's expected exit.
Exit strategy
What an exit strategy means on a short-term facility, and why lenders assess it as closely as the security itself.
Facility limit
What a facility limit is, how it's set on a revolving facility, and why the limit and the amount drawn are different things.
Factoring
What factoring is, how it differs from invoice discounting, and whether a business's customers know the facility exists.
Finance lease
What a finance lease is, how it differs from an operating lease, and who typically owns the asset at the end of the term.
Fintech lender
What a fintech lender is, how its process typically differs from a traditional lender, and where it fits on the panel.
Foreign Investment Review Board (FIRB)
What FIRB approval is, when a foreign investor typically needs it, and how it interacts with finance timing.
Foreign purchaser surcharge
What the foreign purchaser surcharge is, how it's applied on top of standard duty, and why it varies by state.
Garnishee notice
What a garnishee notice is, who it's issued to, and why refinancing an ATO debt before one is issued matters.
General security agreement (GSA)
What a general security agreement (GSA) covers, how it differs from a mortgage over property, and when lenders require one.
Going concern
What a "going concern" sale is, why it can be GST-free, and what it means for a commercial property purchaser.
Gross realisation value (GRV)
What gross realisation value (GRV) means in a development feasibility, and why lenders test it alongside cost and margin.
GST margin scheme
What the GST margin scheme is, how it changes what GST is payable on, and why it matters for a development's cash flow.
Indicative terms
What "indicative terms" means in a lender's offer, and why it's not the same as a firm, unconditional approval.
Intercreditor agreement
What an intercreditor agreement covers on a mezzanine-funded project, and how it differs from a simple deed of priority.
Interest cover ratio (ICR)
What ICR measures, how it differs from DSCR, and what ratio lenders typically want to see on an income-producing property.
Interest reserve
What an interest reserve is, how it's funded, and why it differs from simply capitalising interest onto the loan balance.
Invoice discounting
What invoice discounting is, how it stays confidential from customers, and how it differs from factoring.
Land banking
What land banking means as a strategy, and how a land bank loan is structured around holding a site through approvals.
Land tax
What land tax is, how it's assessed, and why lenders factor it into serviceability on an investment property.
Letter of credit
What a letter of credit is, why it's used in trade finance, and how it protects both an importer and an overseas supplier.
Limited recourse borrowing arrangement (LRBA)
What an LRBA is, why SMSF lending is structured this way, and what "limited recourse" actually limits.
Line fee
What a line fee is, how it's calculated on an undrawn facility, and why it matters on a revolving line of credit.
Liquidation
What liquidation is, how it differs from receivership, and what it means for a director's and the company's finance options.
Loan to cost ratio (LTC)
What loan to cost (LTC) means in development finance, how it differs from LVR, and which ratio actually caps a construction facility.
Loan to value ratio (LVR)
What LVR means in commercial and private lending, how it's calculated, and why the ratio a private lender accepts differs from a bank's.
Low-doc
What a low-doc loan is, who typically uses one, and how lenders assess serviceability without full financials.
Part IX debt agreement
What a Part IX debt agreement is, how it differs from bankruptcy, and how it's treated by lenders assessing an application.
Personal Property Securities Register (PPSR)
What the PPSR is, why lenders register security interests on it, and what a search tells a borrower before settlement.
Pre-sales
What pre-sales are, how many a lender typically wants before funding construction, and how they change the terms available.
Preferred equity
What preferred equity is, how it differs from a mezzanine loan, and why a developer might choose it to fund a project's capital gap.
Priority deed
How the term "priority deed" is used in practice, and how it relates to a deed of priority between secured lenders.
Private credit
What private credit means as a lending category, and how private lenders differ from banks and specialist funds.
Progress claim
What a progress claim is, how it triggers a construction drawdown, and how retention interacts with it.
Receivership
What receivership is, how it differs from liquidation, and what refinancing a business out of receivership typically involves.
Refinance
What refinancing means in a business context, common reasons for it, and what a lender checks on a refinance application.
Residual stock
What residual stock finance is, and why a developer uses it instead of discounting unsold units to meet a construction facility's maturity.
Retention
What retention means in a building contract, why it's withheld, and when it's released back to the builder.
Rural property
What counts as rural property in lending terms, and why it's assessed differently from standard commercial real estate.
Safe harbour
What the safe harbour provisions are, how they protect a director attempting a turnaround, and why advice is essential.
Second mortgage
What a second mortgage is, how it differs from a caveat loan, and what a first mortgagee's consent involves.
Selective invoice finance
What selective invoice finance is, and why a business might fund a single invoice rather than its whole debtor ledger.
Serviceability
What serviceability means in commercial lending, how it's tested, and why it matters even on asset-backed facilities.
Settlement
What settlement means in a lending context, what typically happens on the day, and why it differs from credit approval.
Specialist fund
What a specialist fund is in commercial lending, and what kinds of deals it's typically set up to write.
Subdivision
What subdivision means in a development context, and how lenders assess a subdivision project differently from a single-dwelling build.
Term sheet
What a term sheet sets out, how binding it is, and how it differs from formal credit approval.
Trade finance
What trade finance covers as a category, and how it differs from invoice finance or a standard working capital facility.
Transfer duty
What transfer duty is, when it's payable, and how it factors into a purchaser's funds-to-complete on settlement.
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