Commercial loans continue to boom despite economic downturn
Despite the struggle many small businesses are facing in the current economic downturn commercial loans are still booming according to CUA’s (Credit Union Australia) Acting CEO Rob Nicholls.
His claims come following the Franchise Australia 2008 Survey, released at the end of last year, which found that franchising is continuing to experience strong growth.
The survey found that the Australian franchising industry, which has an estimated 1,000 franchise systems, had grown approximately 15 percent from 2006 to 2008.
Mr Nicholls said all those franchisees needed loans to start up their business and many were coming to CUA to obtain commercial loans.
“The current economic climate has not done much to slow down the franchising industry,” he said. “In fact new franchisees continue to approach CUA branches and other financial institutions to obtain commercial loans.
“While there might have been a slight slowing of the market initially things seem to have quickly got back on track.”
Franchisees of Muffin Break at Sunshine Plaza, Rachael and Steve Trigg said they were lucky enough to have their commercial loan approved by CUA.
“We already had our home loan with CUA and when we decided to purchase our first business we found CUA’s products were quite competitive to those offered by banks,” Rachael said. “Plus it was clear we had the encouragement and support we needed from our local CUA branch team.”
Mr Nicholls said franchising was often viewed by financial institutions as a positive option for owning a small business due to the support and systems provided by the model.
“Considering the speculated current financial market turmoil, a business opportunity that provides proven structures, systems and an established brand is often looked upon more favourably by financial institutions if you are applying for a commercial loan,” he said.
“When Stephen and Rachael from Muffin Break Sunshine Plaza approached CUA the fact they were purchasing a well established brand made their business venture seem less risky.
“Plus when CUA was provided with the store’s sound 2006 and 2007 financial results, from when it was owned by the previous franchisees, it gave Stephen and Rachael’s business venture a bigger boost.”
Mr Nicholls said it was a ‘thumbs up’ in the eyes of financial institutions when a person applying for a commercial loan had a background in the industry they were trying to start their business up in.
“The more experience you have in the industry you’re getting into, the better chance you have of obtaining a loan.
“Stephen’s position as a Banquet Manager with the Hyatt Hotel gave him a sound background in the hospitality industry and was an assurance to CUA that he knew what kind of market he was getting into and what to expect.
“In the end CUA was able to assist Stephen and Rachael with the purchase price of their business, the equipment portion of the purchase and provide working capital, which is absolutely critical for any business venture, especially during the ‘start up’ phase.
“Stephen and Rachael were provided with a commercial loan, fixed for one year which gave them some confidence that at least for their initial twelve months of operations they knew exactly what their loan commitment would be and could budget accordingly.
“The CUA commercial loan facility was also advanced on an interest only basis for the initial twelve months – this reduced the Trigg’s initial commitment, which aided their cash flow in the initial phase of their business.”
For further information about CUA commercial finance or other CUA products visit www.cua.com.au or call 133 cua (133 282).
