Reference no: EM133001242

(Loan Structure options:

1. Cross collateralisation as one or more loans are secured by more than one property

They expect to fund the property with a $550,000 business loan and the remaining $200,000 each from their own home equity. The business loan will be funded for 15 Years, with a $30,000 annual principal reduction and a $100,000 balloon payment that can be paud out or refinanced at the end of the term. Stamp duty and other settlement related costs would be charged from the business funds. In this option, they might possibly get better interest rates, however, they run the risk of losing protection under the NCCP as the home will be used for security for an unregulated loan.

2. Use business property as security and cash contribution from business account

The property would be purchased with a 70% business loan ($665,000) and a 30% ($285,000) contribution from the business account (which is currently sitting at $400,000). The loan will be funded for 15 years, with a $30,000 annual principal reduction and a $215,000 balloon payment at the end of the duration that could be refinanced or paid out.

Recommendations:

I will consider using a business loan backed by the property and a cash contributions from the company to fund the purchase of 100 smith st. This loan will be applied with the following banks- NAB, Commonwealth bank or Bendigo Bank. The loan amount would be for $665,000, with a $285,000 owner contribution. Since the deposit of $95,000 has already been paid, $190,000 would need to be contribute form the company account.)

Q: Detail the security instrument to be used for this transaction and what impact this may have on the business