It is possible to lend to the owners of a company where an ATO debt is outstanding, [but] it is critical for brokers and lenders to establish a trail of discovery that shows plans have been considered to enable the Applicant to pay...
Snapshot
| Borrower Rate % | 12% p.a. |
| LVR % | 75% |
| Loan $ | $4,100,000 |
| State | Qld |
| Property Type | Rural-residential & vacant land |
the broker's journey
Our Applicant sought a loan to buy a rural property in a Family Trust (with a corporate trustee), but were having difficulty getting finance and their settlement date could no longer be extended by the vendor. The complication was that they intended to use cash from their trading business as a deposit, however, the business held a corporate tax debt of around the same amount. On further investigation, there were also misleading signs the Applicants might be preparing to wind-up the business.
The ATO is no dummy – funds siphoned off for asset purchases without addressing the tax debt would draw immediate attention and potential claw-back. It was clear why other lenders were gun-shy.
Semper's unique solution
To shore up capacity to lend without incurring the wrath of the ATO, Semper first established the Applicant’s intent and motivation to continue their business. This required estimating the intrinsic value of the business; its good will, retained earnings and add-backs. This could satisfy that the value of retaining the business was greater than putting it into Administration.
Next we sought proof of a commitment to pay the ATO – recommending tax advisors to help them establish a payment plan. Finally, we included two additional properties owned by the Applicant. These were already highly geared but listed for sale. We calculated the net return and determined that upon sale, there would be sufficient equity to reduce the debt on the primary security and clear the ATO debt.
Once these matters were satisfied, Semper was happy to lend.
lessons learnt
It is possible to lend to the owners of a company (or group of companies) where cash exists and an ATO debt is outstanding. To do so, it is critical for brokers and lenders to establish a trail of discovery that shows plans have been considered to enable the Applicant to pay (or at least reduce) the debt in the event things do not pan out as they intend.
Most importantly, a lender or broker must be seen to advise against the transfers of cash and assets away from the indebted company. So long as assets are being added to the pool which could satisfy an ATO debt, then a loan to an ATO indebted company can be achieved – it just won’t be by a bank.
Commercial lending
Semper is a leading non-bank lender specialising in property-secured loans to businesses in any industry with loan sums from $250K – $30M 1st and 2nd mortgages Australia-wide up to a maximum LVR of 80%.
Semper offers a wide range of flexible products tailored specifically for you. We specialise in all your short-term and bridging finance needs.
We don’t do loans the banks won’t, but assist when the banks can’t, usually due to timing or circumstance.
COMMON LOAN USES
Managing cash-flow challenges, such as:
- Tax liabilities and ATO debt
- Replacement finance or deleverage from an existing lender
- Pre-insolvency issues/ release from administration and turnaround
- Creditor payments
- Release of equity
- Debt refinancing
- Seasonal trends
- Business emergencies
CAPITALISING ON AN UNEXPECTED OPPORTUNITY
- Bridging the gap between sale and purchase (residential or commercial)
- Rapid drawdown and equity release
- Buying a business
- Meeting the capital needs of a growing business
