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 Banking arrangements for leasehold centers vary significantly between lenders. Key considerations for owners include:

1. Loan to Value Ratio (LVR) or Gearing Level: Balancing debt and cash is essential for future growth.
2. Interest Rates and Bank Fees: We thoroughly review your banking arrangements, including loans and transactional banking, to ensure they are market-leading.
3. Security Position: Typically involves a General Security Agreement over the business, Directors' Guarantees, and a Mortgage over Lease with Right of Entry provisions for the Landlord and Financier, if appropriate.
4. Forecasting: We collaborate with our clients to prepare accurate forecast figures.
5. Covenants: Banks may impose financial reporting and key ratio benchmarks. We assist in negotiating and managing these requirements

 Banking arrangements for freehold going concern centers vary significantly between lenders. Key considerations for owners include:

1. Loan to Value Ratio (LVR) or Gearing Level: Balancing debt and cash is crucial for future growth.
2. Interest Rates and Bank Fees: We thoroughly review your banking arrangements, including loans and transactional banking, to ensure they are market-leading.
3. Security Position: Typically involves a General Security Agreement over the business and property-owning entity, a first Registered Mortgage over the property, and Directors' Guarantees.
4. Forecasting: We collaborate with our clients to prepare accurate forecast figures.
5. Covenants: Banks may impose financial reporting and key ratio benchmarks. We assist in negotiating and managing these requirements.

Banks have varying appetites for funding childcare centers as investments. At Hunter Finance, we take a tender approach to secure the best terms available for our clients.

From a financier's perspective, two key ratios are crucial when purchasing a childcare center as an investment property:

1. Loan to Value Ratio (LVR) or Gearing Level: Childcare centers are considered a "Specialized Asset" in the banking world, meaning the site typically does not have an alternative use. As such, the LVR is a critical factor.
2. Cashflow, measured by the Interest Times Cover Ratio (ITC) or Interest Cover Ratio (ICR): Banks use this ratio to assess cash flow adequacy.

 Managing margins and expenses throughout construction is crucial to maximise returns. Developers must obtain three building quotes from experienced Childcare Builders to ensure the project costs are within market parameters. We collaborate closely with Builders, Quantity Surveyors, Valuers, Childcare Agencies, and Financiers to provide you with access to top consultants in the Childcare Industry. Additionally, it's essential to continuously liaise with the Childcare Licensing Department to ensure compliance with their regulatory requirements. Even with DA and BA approvals, the licensing department ultimately grants the operational license. We've seen instances where completed developments couldn't open due to lack of license approval, emphasizing the importance of experienced consultants throughout the process.

New centres, known as Greenfield Centres, present unique challenges for financing due to their unproven cash flow, which is based on forecast performance post-completion. As of June 2024, we have a track record of delivering projects with an all-up rate below 6%. Financiers can structure debt facilities in various ways, including terms like Facility Fee, Customer Margin, Line Fee, Undrawn Fee, Service Fee, BBSY, and Bank Rate. Understanding the total cost, or 'all-up rate,' is crucial.

Developers typically use platforms like GapMaps to identify suitable sites based on demographics. Professional advice from reputable Valuers and Childcare Agencies helps determine site viability. Since 2021, site values have significantly increased from around $12,000 per place to upwards of $20,000 per place. Build prices also vary, with a recent project we assisted with, contracted at $52,000 per place. An experienced Quantity Surveyor can help developers finalize build prices to ensure project viability.

Key factors to consider when building your childcare centre include:

• Location, Design, and Staff: These are crucial to success.
• Expert Consultation: Surround yourself with experts in their fields.
• Building Quotes: Obtain at least three quotes.
• Builder Vetting: Be aware most banks will thoroughly vet the Builder's financial capacity.
• Quantity Surveyor: Banks require a Quantity Surveyor to vet each progress claim to maintain cost control.
• Preparedness: Be ready for potential delays, overruns, or variations.

Transactional banking is often overlooked by many Childcare Operators when sourcing debt facilities. Each bank offers vastly different transactional banking services. At Hunter Finance, our goal is to maximize returns for our clients by providing a holistic proposition. In a recent tender, we secured exceptional transactional banking terms, significantly reducing monthly account fees while delivering excellent 'at call' returns. This resulted in an overall cash positive position of $48,000 per year for our client.

At Hunter Finance, our experience and deep understanding of money markets help our clients achieve the best outcomes. The banking environment is highly complex, and while bank managers focus on maximizing the bank's returns, our sole focus is on maximizing returns for our clients.