What lenders look for
Michael Scanlan, State Leader for Professional Services in NSW and the ACT at Macquarie Bank, leads a team who look after the business banking needs of professional services firms. He notes that some attributes and behaviours are more favourable to borrowing capacity.
“Some businesses that have high levels of debt or have lower profit margins can't go and borrow more, because they're capped out due to servicing constraints,” he says.
To this end, it’s important for business leaders to understand the importance of the habits they demonstrate to a lender, including their ability to focus on paying down debt.
Olivia Ellis, National Head of Accounting and Financial Services at Macquarie Bank, leads a team focused on providing growth solutions to accounting and financial planning businesses. She notes businesses that develop this habit early on often find themselves in a better position than their competitors.
“During an economic downturn, these businesses already have the right habits in place and are continuing to create more equity within their balance sheet,” she said.
“They’re not necessarily feeling those creeping interest rate rises as heavily because their debt position is amortising - that is, they’re repaying principal from their headline loan value.”