BoI refused me a loan to buy my business premises

S

siofra1

Registered User
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12
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...
 
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
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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 (????)
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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
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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.
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If your capital and interest are significantly lower at 15 years, surely you can manage them at 12?
 
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.


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


If your capital and interest are significantly lower at 15 years, surely you can manage them at 12?
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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.
 
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.
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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.
 
I already have received commercial loans from the same institution at 80% LTV with even a 20 year term on one.
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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
 
Importer said:
Suggest you send it to the Credit Review office
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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
 
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.
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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.
 
1 We are only lending maximum of 50- 60% LTV ratio and you would have to be AAA+ or Tesco to receive this
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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 (????)
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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
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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.
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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
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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.
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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.
 
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
 
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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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.
 
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.
Click to expand...
 
One is almost paid off and have equity it far greater than the amount of negative equity in the other,
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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
 
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)
 
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
Click to expand...

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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