Private lending is available to developers of:
Private lenders can be organisations or individuals such as:
Property developers often use private lenders to finance their new builds and renovation projects.
Private lending is especially helpful to developers who were turned down by conventional banks because the developers did not meet their strict lending criteria.
It’s also suitable for developers who need flexible lending – for example, if someone needs finance immediately, but won’t be able to repay the loan until the project is complete.
Developers also turn to private money lenders for short-term finance solutions – for example, if they want to buy a building to renovate it over a three-year period.
On the other hand, if you wanted to finance a ‘vanilla’ transaction, like buying a home or a small commercial property, you probably wouldn’t use a private lender.
Unlike conventional banks, private loan lenders do not use rigid rules. Every case is decided on its own merits.
That’s why property developers can get so much benefit from working with a finance broker. Once you’ve explained your financial situation and development project to the finance broker, they can look for a private lender that would be willing to finance your project (assuming that’s a suitable solution).
You will probably need some type of asset to secure the loan – either the development project itself, or other assets like your private residence or investment portfolio.
Talk to Crowd Property Capital about finance if:
To discuss your lending options, book a free strategy session with David Lovato.
Phone: 0434 932 634
Email: [email protected]
How does private lending work in Australia?
A developer – often with the help of a finance broker – will present their proposed development to a private lender. The parties will discuss how much money the developer needs and how the private lender will be compensated. Compensation could include:
The most important part is the agreement between the developer and private lender. This agreement must set out:
The contract between private lenders in Australia and borrowers are protected by Australian contract law, which is based on English common law.
Depending on the contract, it may also be protected by the National Credit Act, which is administered by ASIC, the financial services regulator.
The parties may also be protected by the National Consumer Credit Protection Act.
How do you qualify for a private loan?
There are no set criteria. If you have a project, assets and the prospect of making a profit, you could qualify for a private loan. The criteria is purely based on the value proposition of the investment and whetheror not its makes financial sense for the private lender to invest in you and your development.
What are the benefits of private lending?
The benefits of private lending are:
What do private lenders do?
Private lenders provide finance for property development projects and other purposes.
But private lenders are not a homogenous group. So each private lender will use their own criteria to decide which borrowers to approve, which projects to fund and how to conduct due diligence.
A private lender’s main goal is to create wealth for themselves or their clients. So a successful development project can deliver a win-win outcome – you get your project funded and make a profit, while private lenders increase their or their clients’ wealth.
Are private lenders better than banks?
Private lenders are more flexible than conventional banks, so they may be a better option depending on your personal situation.
Conventional banks often have inflexible lending criteria and a risk-averse culture, which means even quality borrowers and projects can be rejected.
In contrast, private lenders tend to be more open-minded and entrepreneurial, so they’re more willing to judge loan applications on their merits.
Private lenders may also have more flexible loan criteria, like being willing to wait longer to be repaid or receive a share of the assets instead of money.
On the other hand, private lenders may charge higher fees and interest rates than banks, which is why, if you’re able to secure finance from a conventional lender, that may be the better option.
What are the risks of using a private lender?
The big risk for a property developer is that the contract may be skewed in the lender’s favour.
That’s why it’s so important for developers to get expert advice from a finance broker before applying for private finance.
Crowd Property Capital Pty Ltd (CPC)
A registered company under the Corporations Act 2001, ACN 600 539 544
An accredited member of the Finance Brokers Association of Australia (FBAA) Member No M-352808
A licensed Corporation under the Property, Stock and Business Act 2002, Corporation License No. 10065109.
A member of the Real Estate Institute of NSW (REINSW)
David Lovato (Sole Director) holds a Certificate IV in Finance and Mortgage Broking and Property Services (Real Estate Agents License No 201 604 57 )