# BoI refused me a loan to buy my business premises



## siofra1 (5 Mar 2012)

I cannot get a commerical loan to buy a property I'm renting.
My bank informed me
1 We are only lending maximum of 50- 60% LTV ratio and you would have to be AAA+ or Tesco to receive this
2 You are outside of the Dublin area (????) 
3 Your good financial track record and well conducted accounts with us is worthless
4 Maximum term offered is 12 years on any commercial loan to buy a property but I need 15 years.

I  have 30% of the purchase price available 
My capital and interest repayments would be significantly lower than the rent I'm currently paying. 
I've never defaulted on a loan nor entered my overdraft facility of 25K.
I'm dumbfounded! No wonder this country's at a stand still...


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## Importer (6 Mar 2012)

Doesnt sound right...
Which bank is it ?


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## siofra1 (6 Mar 2012)

Boi


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## Brendan Burgess (6 Mar 2012)

siofra1 said:


> 1 We are only lending maximum of 50- 60% LTV ratio and you would have to be AAA+ or Tesco to receive this



Seems reasonable to me about the 60% LTV.  The bank is entitled to set such a criterion. Such loans have a higher default rate so a higher deposit is often required.  I am surprised that they told you that you had to be AAA+ to get it. I presume that this was not in writing?


> 2 You are outside of the Dublin area (????)


Sounds like a local official hiding the real reason from you. I would imagine that there are parts of the country where the bank is less enthusiastic about lending.




> 3 Your good financial track record and well conducted accounts with us is worthless


I understand that the banks are now looking at future repayment capacity rather than history, which again is a good thing.




> 4 Maximum term offered is 12 years on any commercial loan to buy a property but I need 15 years.
> 
> My capital and interest repayments would be significantly lower than the rent I'm currently paying.


If your capital and interest are significantly lower at 15 years, surely you can manage them at 12?


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## siofra1 (6 Mar 2012)

The criteria is onerous and not reasonable. The rent already paid by myself would be higher than the loan repayments so risk of default is low.
My cash flow has also significantly improved in the past nine months. 
Yes I was surprised when told we're lending these type of loans to AAA+ clients. If it was in writing it would be copied and included with my application to The credit review office. I never knew there are parts of the country where banks are less enthusiastic to have a loan repaid! This official seems to believe it's every sq mile outside the greater Dublin area. I already have received commercial loans from the same institution at 80% LTV with even a 20 year term on one. I'm looking for 70-75% and a 15 year term which I believe is very reasonable.
So I'm going to strongly disagree with you here Brendan as this is a prime example of banks not wanting to lend to small SME.





Brendan Burgess said:


> Seems reasonable to me about the 60% LTV.  The bank is entitled to set such a criterion. Such loans have a higher default rate so a higher deposit is often required.  I am surprised that they told you that you had to be AAA+ to get it. I presume that this was not in writing?
> Sounds like a local official hiding the real reason from you. I would imagine that there are parts of the country where the bank is less enthusiastic about lending.
> 
> 
> ...


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## wbbs (6 Mar 2012)

Isn't there something in place now where you can appeal these decisions to a higher power, sorry don't remember details but heard it being discussed on business show some Sunday recently.


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## mercman (6 Mar 2012)

siofra1 said:


> So I'm going to strongly disagree with you here Brendan as this is a prime example of banks not wanting to lend to small SME.



OP, In case you aren't aware, the lunacy as to how the Banks carelessly threw money around in the past is been thrown against those that towed the line. Nobody, No person or No entity have a right to force banks to lend to them. They are not a Public facility to be used or abused.

Saying all that I sympathize with you. Have you not tried to have your rent reduced. It just may be easier to pay a lessor rent than to tie yourself up with a long term commitment to an Institution who in turn choose to offer you the money, which will make you pay dearly for the funds.


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## wbbs (6 Mar 2012)

http://www.creditreview.ie/

This is the link, if you fit their criteria.


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## Brendan Burgess (6 Mar 2012)

> I already have received commercial loans from the same institution at 80% LTV with even a 20 year term on one.



Hi Siofra

Are these still outstanding? 

It could well be that BoI considers that you (i.e. they)  are already sufficiently exposed to property.  Are these properties in negative equity? 

Could you sell one of these properties to buy your premises? 

Brendan


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## Importer (6 Mar 2012)

Suggest you send it to the Credit Review office


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## Brendan Burgess (6 Mar 2012)

Importer said:


> Suggest you send it to the Credit Review office



I think it's better to get a fuller picture of the case first. If Siofra has other loans and properties, it may be that BoI's decision is perfectly reasonable. BoI is one bank which is more open to lending at the moment. 

Brendan


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## Bronte (6 Mar 2012)

siofra1 said:


> . I never knew there are parts of the country where banks are less enthusiastic to have a loan repaid! This official seems to believe it's every sq mile outside the greater Dublin area.


 
It is common knowledge that banks will not lend on appartments outside of the cities so why wouldn't the same rules apply to commercial in areas that the bank has decided are not worth lending on.

You first post never mentioned your other loans.  This will have been an important issue on this application I imagine.  Maybe the bank feels you would be overexposed.


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## 44brendan (6 Mar 2012)

> 1 We are only lending maximum of 50- 60% LTV ratio and you would have to be AAA+ or Tesco to receive this


Not necessarily a good lending practise at  the moment. Restricting business lending to this level of LTV will prevent many good businesses from getting access to funds. LTV lending was the main cause of the property bubble. An 80% LTV limit is acceptable provided the assocaited cash-flow analysis of the proposal identifies a satisfactory level of repayment capacity on a stressed interest rate.


> 2 You are outside of the Dublin area (????)


Absolute nonsense. No lender can restrict borrowings only to borrowers within Dublin. This certainly does not sound like a Bank Policy, but more a made up excuse.


> 3 Your good financial track record and well conducted accounts with us is worthless


Shocking response. the main criteria for advancing funds to clients is their historical banking & business track record and reliance on their capacity to continue to run their business in a profitable manner.


> 4 Maximum term offered is 12 years on any commercial loan to buy a property but I need 15 years.


I can't see this as being official BoI lending policy. this restriction makes no sense and again would disallow a high level of good loan propositions.


> I have 30% of the purchase price available


Excellent. This should be a good indicator of your ability to pay the rent plus put funds by to meet future repayments.


> My capital and interest repayments would be significantly lower than the rent I'm currently paying.


Again a very positive indicator. 
Obviously I'm taking the OP at his/her word that the above information is a reasonable reflection of their circumstances, but I'm surprised and disappointed that a proposition of this level would be declined on the basis as stated. This is by no means indicative of good lending practise, but rather a fear of mistakes or an aversion to growing the loan book. If this is indicative of how one of our main Banks is now responding to commercial clients I am extremely concerned as to how we can grow our Economy. We need banks to lend to businesses that to show prospects for success in the current market. We also need good Relationship Managers within those Banks capable of identifying those clients likely to succeed. 
This may not be indicative of the average response to clients, but it should give rise to concern.


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## Importer (6 Mar 2012)

I am also going through a similar application to that of the OP at the moment

We are probably working with the same bank as the OP

The LTV is exactly the same as the OPs

The property is outside the Dublin area

The response from the bank has been very positive and encouraging although I havent formally submitted the application yet

I submitted a similar application this time last year where the loan was approved without too much fuss although the property purchase fell through due to legal reasons

Unless there are some very relevant factors that the OP has omitted to outline,I would ask the bank to run it through their internal appeals process 
and then on to the Credit Review Office if necessary


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## siofra1 (6 Mar 2012)

One property is in negative equity, 
One is almost paid off and have equity it far greater than the amount of negative equity in the other,
Businesses are all performing well,
Loans are all perfoming
As mentioned cashflow is always good and never had an issue with the bank until this.
BOI are reasonable and more open to lending at the moment!!!!!! I don't think so....



Brendan Burgess said:


> I think it's better to get a fuller picture of the case first. If Siofra has other loans and properties, it may be that BoI's decision is perfectly reasonable. BoI is one bank which is more open to lending at the moment.
> 
> Brendan


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## siofra1 (6 Mar 2012)

*Credit Review Office*

Appealing to the credit review office takes a little too much time. approx 30 days for them to appeal directly to the bank after receiving formal loan offer/refusal and then wait to receive a reply.(Time length here?)

This is time I don't have.


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## siofra1 (6 Mar 2012)

The banks are a public facility ( Do I really need to write the taxpayer bailed them out) We the public and nation cannot function without a good and proper operating banking structure.
How am I using and abusing a bank by demonstrating my repayment capacity.




mercman said:


> OP, In case you aren't aware, the lunacy as to how the Banks carelessly threw money around in the past is been thrown against those that towed the line. Nobody, No person or No entity have a right to force banks to lend to them. They are not a Public facility to be used or abused.


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## Brendan Burgess (6 Mar 2012)

> One is almost paid off and have equity it far greater than the amount of negative equity in the other,



Do you have a mortgage on your home? 

Is it possible that the bank wants you to use your cash to pay down the negative equity on the other mortgage? 

Are all these loans with Bank of Ireland?  Are they trackers? 

Have you offered the property with the equity to the bank as security. If you do that, then the ltv will be a lot less than 50%. 

Brendan


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## siofra1 (6 Mar 2012)

Yes, I do have a mortgage on my home 

Yes, 2 including my homeloan are trackers

I'm currently reducing the negative equity and capital on all loans by paying capital and interest every month on these annuity mortgages.

I never offered the  property which is almost paid off as security. (Thanks for that)


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## demoivre (6 Mar 2012)

siofra1 said:


> I cannot get a commerical loan to buy a property I'm renting.
> My bank informed me
> 
> 3 Your good financial track record and well conducted accounts with us is worthless



Wow, hard to believe a bank would say this.  What does your accountant suggest? Personally wouldn't take no for an answer and would have zero hesitation in taking my business elsewhere. Maybe you should talk to a recommended authorised advisor who deals with commercial mortgages and see if they can come up with a solution. On the face of it if the repayment capacity is there and there isn't an issue with security / LTV you should be able to secure finance.


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## 44brendan (6 Mar 2012)

no authorised advisors (commercial brokers) with bank credibility still operating AFAIK. Ulster & NIB are reluctant to look at propositions from those banked elsewhere. AIB appears to be the only realistic alternative. Pick a large branch if you have an option as they are more likely to have a higher local lending discretion.


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## demoivre (6 Mar 2012)

44brendan said:


> no authorised advisors (commercial brokers) with bank credibility still operating AFAIK.



 Really? I wonder do the high integrity bankers see the irony.


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## Commercial (6 Mar 2012)

I find the repsonse to your application very strange. I am currently applying for a commercial premises loan facility for a client of mine. BOI have indicated the following for a rural West of Ireland case, 
1. Up to 70% LTV
2. A good repayment record will stand to you. 
3. A 15 year term stressed at 8%

I am also dealing with another Bank who are open to providing finance. However, this is at early stages.

They may feel that you are overexposed with the other properties in your portfolio, but it is hard to review the whole case without having the full picture


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## 44brendan (6 Mar 2012)

"Commercial" I'm also very surprised at this response and suspect that it may be more to do with the Bank Official than the Bank's official stance. It goes against everything else that I have heard re BoI's policy.
OP did you actually deal with the manager? was this a small local office?


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## Commercial (6 Mar 2012)

I suspect a bank official lacking motivation for one reason or another.
Also, there maybe other factors


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## Brendan Burgess (6 Mar 2012)

siofra1 said:


> Yes, I do have a mortgage on my home
> 
> Yes, 2 including my homeloan are trackers
> 
> ...



Hi Siofra

Would you mind summarising the three existing properties and mortgages you have to give us an overall picture. Value of property, underlying mortgage and interest rate. Also the value of the property you want to buy and the amount of cash you have. 

Brendan


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## munchy (24 Mar 2012)

siofra1 said:


> 3 Your good financial track record and well conducted accounts with us is worthless



In this case it seems there is no real reason for me to be so worried about my future credit rating as no one will lend anyway. This sort of thing will just stall growth in all sectors


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## siofra1 (18 Feb 2013)

*1 year later*

I started this thread about a year ago and for the first time I had really hit a wall in my career.
I completed the purchase of my premises mid last year and now can say things are looking so much rosier.

After going back to knock on the bank officials door and make my case why BOI should lend to me, I got my loan at 70% LTV over 15 years.
After a little more persuasion, and again putting  my personal and business profile on written paper whilst stating all the reasons why BOI  have to lend to me it was a matter of weeks and  I was in business.

In response to Brendan asking what my underlying debts/mortgages are
Personal debt (never missed a payment never restructured) €945K 
Company debt (never missed a payment never restructured) €1.75million
Personal guarantees (close to what the national debt is)


Anyway the banks are actually lending. Just a little extra persuasion is all that's needed.


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## Brendan Burgess (18 Feb 2013)

Hi Siofra

That is great news. 



> putting  my personal and business profile on paper and stating  all the reasons why BOI have to lend to me it was a matter of weeks and   I was in business.



I am surprised that the bank did not ask for this at the very start. You were asked for it on Askaboutmoney pretty early on.  A loan decision cannot be made in isolation from the rest of your finances. 

But anyway, it's great to hear a business doing well. We tend to hear the sad stories.


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## hhobbit (12 Mar 2013)

this may not belong right here but I think its somewhat relevant:

A local business I frequent has intimated he too is in a similar predicament.  I mentioned then to him I had cash looking for investment opportunity.

He has suggested I loan him 400,000 and in return he will pay me 100,000 per year for five years.  


I can calculate interest rates and annuities and it seems ok-ish. 

Is anyone else doing "this sort of thing"?
Does this make sense?
What about stuff like moneylender's licence? (wife freaking at that)

 But maybe I will just buy something to let. Thoughts?


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## WizardDr (12 Mar 2013)

What you are doing is lending money.

You are not in the ambit of moneylenders licence etc

This would be contract law. You could do this orally -  but that would not be what I do.

Are you alone. No.

- If you know the business
- have seen the cash flow estimates
- can secure your borrowing on assets (you don't say the structure) but lets say its
a company - you would essentially structure this as a debenture
- what covenants and obligations you would require is a matter for you.

The buy to let - what yield would you get?
What risk would you have?

Compare the two..


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