Commercial Bills

Commercial Bills

Although commercial bills are usually associated with business lending (as the name suggests), they are also available for larger scale investment borrowings ($1,000,000+).

How do Commercial Bills work?

A commercial bill's underlying interest rate is driven by the Bank Bill Swap Rate (BBSW), to which the lender adds a margin called the facility fee. This margin will vary significantly (from 1.00% to 3.00% pa) and is dependant on a combination of factors such as the financial strength of the borrower, the underlying security, competitive pressures etc.

The combinations with this product are almost endless. The bills can be variable rate or fixed rate (1 to 10 years). They can be 'rolled' at 30, 60, 90, 180 days, 6 monthly and even annually. Interest is paid at each rollover.

Ceiling Rates

One unique feature of commercial bills is the ability to purchase a ceiling rate. What this means is that if you are on a variable rate, but your rate cannot go over a predetermined 'ceiling'. It is almost like getting an insurance policy on your interest rate. This can be particularly useful in a volatile interest climate, but be aware that it is typically offset with a higher 'floor' rate. The underlying security for commercial bills is open to negotiation.

Why do people use Commercial Bills?

When you are borrowing for significant commerical or investment purposes, Commercial bills are an option worth considering. They can be an excellent answer when you need a significant injection of cash - generally more than $100,000.

Interest Rates and Terms

Commercial bills are normally offered from 7 to 180 days with fixed interest or variable interest rates. You generally negotiate for a term and within that term there may be several rollovers. At the end of each term you would typically renegotiate the rate. With fixed rate bills, your interest rate is constant for the term of the facility, which may include several 'rollovers'. With variable rate bills, the interest rate is fixed for each period, but as the period is extended or rolled over, the interest rate may rise or fall.

More Information on Commercial Bills or Investment Lending?

If you would like more information on Commercial Bills, or borrowing for either residential or commercial investment, call us on 13 XINC. If you are calling from overseas, call us on +61 2 90188417 or simply click here to confidentially talk to a finance broker about your options.