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Australia's ever growing population is causing new residential developments to be built at an impressive rate. To match the demand, roadways and public transport initiatives continue to be rolled out to service new residential suburbs. Ongoing residential development and new infrastructure projects, coupled with Australia's ever-increasing population, has seen demand for landfill sites rise to peak levels. More people leads to greater consumer and business waste, while construction and infrastructure causes increased demand for the disposal of construction materials, soil and other natural waste.
For experienced investors and people with valuable waste management skills, a landfill business can be a profitable enterprise. Read on to find out how to run your own landfill site after being approved for a landfill business loan and how to increase your chances of a successful business loan application.
Under irresponsible management, landfill sites are potentially hazardous and can involve significant risk to the environment, including contamination to soil or nearby water supplies. As such, the management of landfill sites is strictly regulated under Commonwealth legislation as well as under state and territory legislation.
Each Australian state and territory has its own environmental management body that sets minimum guidelines for the operation of landfill sites. These guidelines will include ongoing reporting and monitoring requirements, ongoing waste stabilisation measures, ongoing efforts to rehabilitate the landfill site and the requirement to extract usable resources from waste where possible.
Before making an offer to purchase a landfill site or beginning the finance application process, ensure that you have met all these guidelines and obtained all the necessary licences. Your finance application will not proceed until you have met these requirements, and your application will look much stronger if you can demonstrate a clear understanding of the applicable licencing requirements.
Landfill sites are in a unique category compared to other commercial land as they have a finite life span. A landfill site can only accept a certain volume of waste before it closes down. Once a landfill site has reached its capacity, it will no longer be of any use and cannot be sold or leased out for other business purposes.
It is important to know the life span of a landfill site before purchasing the site. You are unlikely to get approval for a landfill business loan with a loan term longer than the life span of the site. Similarly, a landfill site with a remaining life span of seven years is much more likely to be approved than a similar site with only two years remaining, regardless of the financial circumstances of the borrower.
During the loan application process, the lender will order a valuation report which can only be undertaken by a specialist landfill valuer, and you will need to pay for the cost of the valuation. If the valuation uncovers that the landfill site's life span is too short to make it a viable business endeavour, the lender will deny the loan application, and you will have wasted the money spent on the preparation of the report. You may want to get a valuation yourself before approaching a lender, so that the lender won't reject your loan application based on a short life span.
Unlike the majority of commercial developments, such as factories and office buildings, landfill sites are considered highly specialised commercial property. This is because landfill sites can only be used for one purpose and cannot be converted to other uses in the future. As such, lenders typically apply more stringent loan criteria for landfill business loans than for standard commercial property loans.
Unlike residential property mortgages, lenders who offer commercial loans are not tightly regulated and do not need to publish their loan criteria, interest rates and other loan terms. In the case of highly specialised commercial properties like a landfill site, lenders look at loan applications on a case-by-case basis. The chances of your lender approving your loan application will come down to the strength of your application, your ability to meet the lender's loan criteria and your individual financial circumstances.
Given that applications for a landfill business loan are generally considered on a case-by-case basis and that loan criteria can vary substantially between lenders, there are no standard loan terms that are applicable to all landfill business loans.
However, as a guide, the following loan terms may apply:
You will need to provide a comprehensive business plan as part of the loan application process. This business plan should include cash-flow forecasting and is best created in consultation with a qualified accountant. Be prepared to provide your personal tax returns for at least the last two years along with financial documents for any businesses you have run in the same time period.
If you are planning on running the landfill site yourself, you will need to demonstrate significant experience in the landfill industry. Update your résumé with all relevant experience, and approach this portion of the loan application process as you would a job interview. After all, the lender needs to be satisfied that you have the qualifications and experience necessary in order to run a successful and profitable landfill business.
If a landfill business is already operating on the site, you will need to provide full financial documentation for the business along with proof that a long-term lease is in place.
Entries have now opened for the Finder Green Awards, which celebrate businesses, brands and people that are leading the way when it comes to environmental sustainability.Â
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