Considering private lending, and not sure where to start or whether it's right for you? Our education centre will help you understand the ins and outs of private lending, so that you can make an informed decision.
Private lending is lending provided by private finance or lending companies. While banks (mainly the ‘big four’) are the biggest secured lenders in Australia, there are many transactions that don’t fit the big bank’s criteria, but are still solid, creditworthy deals.
Private loans are normally for shorter periods than bank loans (for example, from 3-24 months) and provide funds to borrowers for specific situations that traditional banks usually won’t fund.
NOTICE TO COMPLETE
“Notice to Complete” on a commercial property settlement A property developer who had already delayed settlement on a Melbourne commercial property was issued with a 'Notice to Complete' from the vendor. He risked losing a $350,00 deposit if he couldn’t settle the transaction within seven days. His broker had led him to believe that finance from a 'major' was imminent, but it wasn’t approved because his tax returns were not up to date.
THE PRIVATE LENDING SOLUTION
The lender advanced first mortgage funding (70% LVR) on a 6-month term, enabling the client to settle on the property. Due diligence was completed and the funds were advanced within five days of application.
Where to next: The client refinanced the private lender's loan with construction funding.
Private loans all require a form of property security. It can be:
Private lenders apply different loan-to-value ratios (LVRs) to different security types. For example, the highest LVR might be applied to residential security in a metro area, whereas raw land in a rural area will attract a much lower LVR.
Qualifying for a private loan is simpler than going to a bank. Lenders will have slightly different requirements but, in general, all private deals must tick four boxes: