Refinancing a Regional Service Station From Specialist Lender to Major Bank
In this case study
Scenario
A regional freehold going concern service station had been financed with a specialist lender for several years.
Since the original purchase, the value of the asset had increased significantly. The property was originally acquired at approximately $1.8 million, with a later valuation around $2.5 million approximately four years ago.
The current valuation increased to approximately $4.85 million on a freehold going concern basis.
Despite the improved asset position and operating history, the client's loan had not been reviewed for several years and the business was still paying a materially higher interest rate.
The challenge
- Existing loan balance of approximately $1.68 million
- Loan still sitting with a specialist lender
- Significant valuation uplift not being used strategically
- High interest cost
- Need to assess whether the client now qualified for major bank funding
- EPA report requirements due to fuel tank upgrades
- Desire to release equity for further commercial property investment
How Bridle Partners assisted
Bridle Partners reviewed the client's current finance position and identified that the business and security profile were now more suitable for major bank assessment. The refinance was positioned around:
- The client's operating history
- Improved property valuation
- Freehold going concern nature of the asset
- Reduced gearing position
- Refinance and equity release purpose
- Practical management of environmental report requirements
Bridle Partners also worked through the property and credit requirements, including the EPA report issue.
Outcome
The loan was refinanced from a specialist lender to a major bank, with an approximate 2.00% p.a. interest rate saving.
The refinance also enabled approximately $1.5 million in equity release.
An EPA report requirement was waived, saving the client approximately $15,000 in additional costs.
The released equity was later used toward a mixed-use / commercial shopfront investment with strong rental yield.
Key lesson
Commercial loans should not be left untouched for years. As business performance, asset value and lender appetite change, a refinance review can materially improve pricing, structure and future investment capacity.
Have a similar finance scenario? Speak with Bridle Partners before you commit to a structure.
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