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17 OCT 2019

Common misconceptions of private lending​

Many developers and investors shy away from private lending due to a number of misconceptions. A common perception is that private lending is slow, expensive and inflexible.

Many of these misconceptions have grown in the past year or two as many inexperienced lenders entered the market without the resources to deliver on funding promises.

In the past few months many of these novice lenders have exited the market clearing the way for better outcomes from experienced finance businesses. In the right hands private lending is much faster than banks, however, you do need to take the right approach to secure finance from the sector.

Private lenders assess each transactions on its merits rather than take the pigeon-holed approach with a fixed credit policy that is typical of the banks. And it is not subject to the whims of banking policy.

For example, pre-sales are not a prerequisite for private finance. The banks’ slow approvals process also presents a major opportunity cost for developers who can wait up to 6 months or more for a finance approval. Private lending can deliver funds in a fraction of that time getting your project to market faster. This approvals flexibility addresses the perception of private lending being more expensive.

While the interest rates are higher than the banks, starting your project earlier in the cycle may in fact increase your profits at the backend of the transaction as it allows you to be first to market. And it is usually a short term loan (6-24 months) so the impact of the higher rates (that are now more competitive than ever) is not as profound.

In fact private lending is frequently used as a bridge to bank finance. In addition, private lending is streamlined and has a more direct approval system – you deal with the people making the decision.

Banks frequently overcomplicate transactions and this non-commercial approach does not deliver the transparency developers require. With private lending your contract is fixed and you get certainty of outcomes.

Windsor Capital offers:

• Loan size from $1.5 million to $30 million.

• No vendor costs are involved until approval is issued

• Loan amount can be inclusive of all loan costs and interest.

• Nominated brokerage fee paid on the day of settlement.

• Interest rate from 7.95%.

• All applications considered on the day they are received

• Staged funding available on large projects.

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