Page 20 - Loan Structure Solutions

Lastly, from a practical perspective, SMSF are not very ‘green’. Almost
a whole forest is killed just to make the paper required to deal with the
application and loan documents. Therefore, if loads of paperwork
doesn’t excite you, make sure you appoint an experienced team of
advisers.

15) Don’t agree to registered mortgage debentures

It might be a thing of the past
because I haven’t come
across it for a while but it’s
still worth mentioning. Do not
agree to a Registered
Mortgage Debenture (RMD).
Banks sometimes ask for

RMD’s as extra security when
lending to a separate entity.
An RMD is essentially a
floating charge over the
entities assets. They probably
already have adequate
security (i.e. registered mortgage over the property) so an RMD is
overkill. Also, other lenders will be less willing to lend to an entity when
an RMD to another lender exists. The simple solution is; don’t give one.

16) Personal guarantees

When applying for a loan in an enti-
ty’s name (company, trust or super
fund) nearly all lenders will insist on
all interested (or controlling) parties
providing personal guarantees. The
main reason for these guarantees is
that the entity alone often doesn’t
have sufficient income to service the
debt. Also, people controlling the en-
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