For Brokers
Private lending explained.
For brokers who have not used it yet.
What it is
A private loan is a business loan secured by property, funded by private capital rather than a bank's deposits. It is assessed on three things: the security, the purpose, and the exit. It runs for 6 to 36 months and is repaid by a sale, a refinance, or a defined event such as another settlement. It is a stepping stone to a longer term position. When the time arrives, the client must repay the amount in full, and move on.
When a client of yours needs one
You'll recognise these.
- An approval that is not going to settle on time.
- An ATO or GST debt that has to be cleared before a refinance can proceed.
- Equity sitting behind a cheap fixed-rate loan the client does not want to break.
- Completed units that have not sold yet, with the construction facility expiring.
- A business that needs capital quickly, secured by property the owner already holds.
In each case the client has good security and a clear way out, and the timing or the structure does not suit a standard process.
But how do you know if the deal fits?
- 1Is the borrower a company or trust, and is the money for a business or investment purpose?
- 2Is the security completed property in NSW, VIC, QLD or the ACT?
- 3Is there a credible exit inside 6 to 36 months: a sale, a refinance, or a defined event?
If you can say yes to all three, send it through.
How we price, and what we pay brokers
Pricing is risk based. The rate reflects the security position (first or second mortgage), the LVR, the term, the location and the strength of the exit. Our offer sets out the total interest, every fee and the exact payout figure at the end of the term, so your client sees the whole cost before signing.
Measured against unsecured business finance for the same purpose, it is significantly cheaper, because the property is doing the work. Private lending exists for the situations where timing or structure matter more than rate.
We pay brokers between 0.5% and 2% + GST.
What to tell your client
"This is a business loan secured by the property, for [purpose]. It runs for [term] and will need to be repaid in full when [the exit] happens. The full cost is [x% and fees]. You can repay early if you like, after the minimum term has elapsed. It's just a bridge to [the exit], not a permanent loan."
The next step
Send the scenario, or call Harry Bawa on 0487 177 567 and run through it in ten minutes.