21 Sep How a non-bank lender meets your business needs.
Last year, Small Business Ombudsman Chief, Kate Carnell said “since the royal commission the banks have been using consumer responsible lending criteria for small business, it is not appropriate or relevant,” she said. “There is no point asking small businesses for fortnightly payslips or what they spend on takeaway and Netflix.”
That’s a sentiment that still rings true.
So true, in fact, that an entire industry exists BECAUSE of it.
What is non-traditional or non-bank lending?
Non-bank lending refers to lending that is direct lending to a borrower, external to a traditional funding mechanism – like a bank.
You may have heard of ‘Private Lending’, ‘Peer to Peer Lending’, ‘Private Mortgages’, ‘Solicitor Funding’ or ‘Solicitor’s Loans’ – these are all, at their core, the same thing – and are all forms of non-traditional or non-bank finance.
Non-bank lending exists to meet the specific need of the borrower and operates within the marketplace where traditional funding is not able to meet the borrower’s needs.
Why do people need non-bank lenders?
Generally, people use non-bank funding for short-term purposes where a quick turn-around time is required and operating to a banks timeline or lending criteria isn’t something that’s possible within the time frame.
Non-bank funding works to a solution-based model and provides access to funding for borrowers who have a solid proposal and real estate security to support the transaction.
What do people fund through private lenders?
Some examples of funding purposes are:
- For urgent property settlements
- For bridging loans between the sale of one property and the purchase of another
- Expansion of business when extra space, equipment, or staff are needed
- To even out any cash flow fluctuations due to operating in a seasonal industry that experiences bumper months mixed with quieter months
- When an opportunistic property or stock purchase comes knocking and quick action is required
- To pay out an outgoing business partner
- Where a traditional funding approval has been reneged upon/withdrawn – we are seeing this a lot with the current state of Australia
- Working capital requirements
- Something different? So long as you have real property security – just ask!
Non-bank funding is a facilitation tool.
Non-bank funding allows you to facilitate the completion of an opportunity. This could be continuing your development project so you can get your pre-sales target for your bank. It could be affording you the opportunity to take advantage of a last-minute supplier offer because you can have the cash flow available quickly to secure the deal. It could fund the purchase and hold strategy for a block of land until such time as you are ready to develop it.
Non-bank funding is quick.
We often hear of borrowers who have had an application with a bank for 30+ days. Each time they call to follow up on the status of their application they are told: “Oh, it’s with credit” or “We are checking its within policy”.
It’s the lending equivalent of “The cheque’s in the mail”. With non-bank funding, a loan application can be turned around in a week. Non-traditional lenders can move quickly on your opportunity. We utilise our own Solicitors who are well-practised in Private Funding to get your loan settled – fast.
Non-Bank Funding gives you options.
Traditional mainstream funders are reluctant to take on second mortgages. Non-bank funders acknowledge that sometimes a second mortgage is the only option. There are plenty who specialise in this particular stream of lending.
Non-bank Funding is exit strategy based
Your Private Funder is not overly concerned about your ability to make monthly repayments on your loan. They won’t need your last three tax returns, 18 months’ worth of bank statements, or require you to hand over your first born child…..
Non-bank funders are primarily interested in the asset held as security.
Not to sugar coat it, they want to know what will be sold to recoup the funds should the loan go into default or if you fail to repay the loan.
The advantage of this is that you don’t have to make monthly repayments on the facility. Interest is generally capitalised and paid upfront for the term of the loan.
Going into the loan you will know how you intend to repay the debt. It could be through:
- Refinance through traditional lending (particularly if you needed to move quickly on an opportunity and your bank couldn’t meet the time frame required)
- Finalisation of a deceased estate
- Sale of the asset
What’s it costing you not to start?
Absolutely, private lending is more expensive than traditional forms of funding. There is no hiding from that and nor do we seek to.
The reward to the borrower reflects the risk to the lender.
But is it more expensive than not taking advantage of an opportunity?
Is it more expensive that not starting your development?
Is it more expensive than paying holding costs on vacant land?
Is it more expensive than selling your property now at a discounted rate?
And the biggie – is it more expensive than going into receivership or declaring bankruptcy?
The answer to all of that, is “no”.
What does IBN Direct offer?
We provide fully vetted lending opportunities for small to medium businesses along the East Coast of Australia. Given the current pandemic, traditional funding sources are retreating, leaving prime transactions searching for funding.
We operate sensibly, working with the facts of the transaction. We want to know:
- Who are we lending to (what is their background, what experience do they have, how do they operate etc.)?
- What are we lending for (why do they need funding, what is the expected outcome, where is their proposal, how is it secured and supported etc.)?
- How is the lender going to be repaid (what is the exit strategy, where will the repayment be coming from)?
- Is this a reasonable risk (what is the security position, is there an acceptable LVR, does the exit strategy support the transaction, is the security sound etc.)?
We offer lending transactions that are exit strategy based, supported by real property security to company borrowers. The transactions are assessed on their own merits.
- Speed – Your private funder can make their own decision about whether they want to fund your loan. They don’t answer to boards, don’t require you to jump through hoops and take a common-sense, exit strategy approach to your loan requirements.
- Flexibility – Private funding can be used for all sorts of purposes. Each deal is evaluated individually and on its own merits. If you are in a position where you anticipate regular peaks and troughs within your business, forming a long-term relationship with your private funder might be a good option. You may be able to negotiate more flexible terms if your funder has an intimate knowledge of your business.
- Approval – Private funding exists to provide finance to borrowers that mainstream lending won’t touch. Your opportunity for approval is right there.
- Convenience – Private funders move quickly, have extensive property knowledge and can make an informed decision quickly. They exist to allow you to act on your business needs as they come up and provide speed, flexibility and approval to get your deal done.
We know Private Funding
Working with a company like IBN Direct gives you options. We are the specialists in the Private Funding market and have the experience and the expertise to know quickly whether Private Funding is an option that will work for you.
Using IBN Direct frees up your time, we work with the funder to get your deal settled. Contact us to find out how you can fund your next project without a bank.