When one finance institution controls 100% of your loans, they also control 100% of your borrowing capacity.

Increased borrowing capacity
One of the most compelling reasons to spread your loans across multiple lenders is the potential to borrow more. Different lenders have varying policies and what might be a ceiling with one institution could be just the beginning with another.

By strategically allocating your loans with different institutions, you can potentially access more funds to fuel your business growth.

Flexibility and risk management
Having multiple lending relationships provides a safety net. If one lender tightens its policies or faces issues, you’re not left high and dry. This approach allows you to pivot quickly and
access funds from other sources when needed.

In addition to this, by keeping your trading accounts separate from your home lender, they don’t control all your cash.

• If one lender has technology glitches, you are not restrained for cash, allowing flexibility when it’s urgent.
• If you accidentally miss a payment by a few days with one lender and they cut off your access, you have other options.

It’s a smart way to manage risk and ensure you always have alternate cash supplies.

Tailored solutions for different needs
Every lender has its strengths. Some excel in equipment finance, some will offer better terms for commercial property and others will have greater capacity to lend on vehicles, trucks and machinery.

By spreading your lending across multiple finance institutions, you can cherry pick the best products for each specific need.

This tailored approach can lead to more favourable terms and potentially significant savings over time.

Consider for example a manufacturing business that may need both working capital and new equipment. By using one of our alternate lenders for a quick, unsecured loan to cover immediate cash flow needs and a traditional lender for equipment finance, we can optimise their borrowing strategy and save on overall interest costs.

Improved negotiating power
When you have relationships with multiple lenders, you’re in a stronger position to negotiate, especially for larger businesses. Lenders know you have options that can lead to better rates and terms. It’s not uncommon for businesses to use competing offers as leverage to secure better deals, even with existing lenders.

Faster access to funds
In the fast paced business world, timing is everything. Having established relationships with multiple lenders means you can act quickly when opportunities arise. Instead of starting from scratch with loan applications, you can tap into existing credit lines or quickly secure additional funding. The evolution of Australia’s SME lending market has led to a diverse range of lending products becoming available. This includes options for borrowing against alternative collateral such as vehicles, machinery and even intangible assets such as invoices.

Some lenders now offer unsecured loans ranging from $5,000 to $250,000 with terms of 3 to 36 months.

Enhanced credit profile
Responsibly managing multiple loans can actually improve your credit profile. It demonstrates to future lenders that you’re capable of handling various financial obligations. This can lead to better terms and more favourable consideration for future borrowing needs.

Protection against policy changes
Lenders’ policies can change, sometimes dramatically. By not relying on a single institution, you protect yourself against sudden shifts that could impact your borrowing capacity or terms. It’s a proactive approach to ensuring your business always has access to the finance it needs.

While there’s comfort in sticking with one lender, the benefits of diversification are too significant to ignore.

Case study: The perils of cross collateralisation
Meet Sarah, a successful entrepreneur looking to expand her business.

She owns a $3M home with only $500K left on the mortgage.

Sarah needs $200K for her business expansion as a deposit to purchase a $1M commercial property.

Scenario 1 – All eggs in one basket
Sarah’s bank offers to lend her the $200K, using her home as collateral. When Sarah wants to purchase a $1M commercial property, the bank suggests cross collateralising both properties.

Result
$3M home + $1M commercial property securing $1.5M total debt.

Scenario 2 – Strategic separation – A savvier approach
Sarah refinances with Lender A, taking $200K cash out against her home.

She then uses this as a deposit for the $1M commercial property with Lender B.

Result
Home loan with Lender A, commercial loan with Lender B, each secured only by its respective property.

Key takeaway
By separating lending, Sarah maintains greater control and reduces risk exposure for her valuable home asset.

Spreading your loans across multiple lenders isn’t just about risk management – it’s about creating opportunities, enhancing flexibility and positioning your business for success.

Diversifying your banking relationships across multiple institutions offers significant advantages, particularly in the digital age.

Here’s a summary of the benefits of using different banks for various financial needs:

Home lending – Lender A
Separating your home loan from other financial products allows you to:

• Protect your primary asset from cross collateralisation risks
• Potentially access better interest rates or terms specific to mortgages

Commercial and business lending – Lender B
Keeping business lending separate helps you:

• Maintain clear boundaries between personal and business finances
• Access specialised business banking services and products

Business cashflow – Lender C
A dedicated account for business operations enables:

• Easier tracking of business transactions and expenses
• Simplified tax reporting and financial management

Personal cashflow – Lender D
Having a separate personal account allows for:

• Better budgeting and expense management
• Protection of personal finances from business risks

While this setup may seem complex, internet banking makes it remarkably convenient.

You can easily manage all accounts without visiting physical branches, thanks to:

• 24/7 access to all your accounts from anywhere
• Instant fund transfers between accounts, even across different lenders
• Automated bill payments and scheduling of regular transfers
• Comprehensive transaction history and reporting tools

This strategy not only optimises your financial management but also reduces dependency on a single institution and potentially leads to better interest rates and reduced overall risk.

As your finance team, we are here to help you navigate the complex lending landscape and create a diversified lending strategy that works for your business.

Let’s chat about tailoring a solution that gives you the control and flexibility your business deserves.