In the finance industry there are always new developments. Debt funding for Commercial Mortgages, Business Finance, Working Capital etc. has changed considerably in recent years. Post GFC, we now see the Bank’s falling over themselves to write good quality business. We have an active non bank sector keen to grow their loan books and private funders new to market providing funding that otherwise could not be obtained.
Banks are more than ever, providing borrowers with the lowest cost of borrowings, however, may not always provided what the borrower is looking for. Generally, their lending criteria are based on historical financial performance and businesses who are new to market or have invested in growth at the expense of profit may not show the net earnings required to get a loan approved.
New Developments – Non Bank Lenders
Non Bank lenders provide a good alternative to traditional Bank funding. They are less likely to consider finance supported by specialised assets, however, they provide a more flexible approach in assessing serviceability. Loans of up to 25 years are available with no annual reviews with interest rates being similar if not lower than those offered by the Banks.
Private funders are known for their higher cost and they need to be referred to as a “bridge”. Our Private Funding Underwriters are reputable in the industry with proven track record. They generally operate under a Managed Fund or Managed Investment Scheme registered through the Australian Securities & Investments Commission (ASIC). If there is a good margin in a contract or funding is required where the Banks say no, Private Funding can be a good option. Generally the maximum term is 12 – 18 months and this should be enough time for a borrower to build a good case with supporting revenue trends to refinance to a Bank. Private funding can also be an option where an existing Bank client is being exited by their Bank, however, there is plenty of scope for improvement in the business performance and a “bridge” is required short term to restore the business back to health.
Working Capital was traditionally financed by way of Bank Overdraft. The pitfall being that the funding provided was generally limited to the property security held. Other forms of funding such as supply chain finance have now entered the market and this provides borrowers with direct funding to the supplier for a specified term. There are more flexible security requirements where a mortgage over property is generally not required. This provides far greater flexibility in funding expansion when self sustainable growth is not possible.
As new developments arise you can be assured Macarthur Finance will keep our clients up to date.