Introducing our new Relationship Manager

Joel PeterPlease join us in welcoming our new Relationship Manager – Joel Peter!

Joel has spent around eight years working in the banks in Australia and New Zealand, primarily in lending. He has also worked as a broker so understands the challenges that brokers face.

As Relationship Manager, Joel will be building relationships with referrers and educating them on PMA’s suite of solutions. He’ll also be able to workshop potential scenarios with referrers and source suitable opportunities to assist referrers close deals.

Joel is particularly looking forward to helping brokers and borrowers to find solutions for a situation where they would otherwise have otherwise lost an opportunity.

A fun-fact about Joel, he loves basketball and the NBA. His guilty pleasure is watching and listening to NBA broadcasters and podcasters debate what is currently going on in the NBA and says his favourite basketball moment was the buzzer-beater shot from the Toronto Raptors’ Kawhai Leonards to win over the 76ers in last years’ Eastern Conference playoffs. You can check out that moment here.

If you have any questions for Joel you can contact him on 03 8370 7081 or [email protected]privatemortgagesaustralia.com.au.

 

 

 

Coded vs Non-Coded Loans

Non-coded loansWhen it comes to obtaining finance from a private lender, it’s really important to understand the difference between coded and non-coded loans. In Australia, we have the National Consumer Credit Protection Act (NCCP Act) which is legislation designed to protect consumers and ensure ethical and professional standards in the finance industry. There now is a nationally consistent framework to legislate the way in which credit is regulated

The NCCP Act applies to credit contracts entered into on or after 1 July 2010 where:

  • The lender is in the business of providing credit
  • A charge is made for providing the credit
  • The debtor is a natural person or strata corporation
  • The credit is provided:
    • For personal, domestic or household purposes, or
    • To purchase, renovate or improve residential property for investment purposes, or to refinance credit previously provided for this purpose.

Under this legislation, loans are determined to be ‘Coded’ or ‘Non-Coded’. Private lenders must be aware of the difference between these classifications. So, what determines what is a Coded and Non-Coded loan?

Coded Loans

If a loan falls within that Protection Act, it is deemed to be a Coded Loan. This simply means that the loan is to be used for domestic purposes only. Borrowers can use the loan to buy a car, to go on a holiday or for other similar domestic reasons. Coded loans are generally provided by big banks, smaller banks, and non-banks collectively referred to as ‘traditional’ lenders.

Non-Coded Loans

A non-coded loan is a loan that is used for business purposes. It is the Private lenders decision to be licensed or unlicensed depending on the types of borrowers they service. Private Mortgages Australia can only lend to business borrowers. It is therefore important to assess whether a loan is coded or non-coded.

Purpose of the Loan

To determine whether a lone is deemed Coded or Non-coded under the legislation, you need to establish who the borrower is and the purpose of the loan. You can be guided by the following:

  1. Corporate Borrower = Non-Coded Loan
  2. Individual Borrower:
  3. Domestic purpose = Coded Loan
  4. >50% Business Purpose = Non-Coded Loan

A Corporate Borrower may borrow funds under their company name for business purposes and this is automatically deemed to be a Non-Coded Loan.

When an Individual Borrower is looking for a loan, the process is a little more complicated. If they are borrowing funds for domestic purposes, the loan is deemed as Coded. However, if more than 50% of the funds are to be used for business purposes, such as buying into a business, purchasing a franchise, commercial property or other business reason, it is deemed to be a Non-Coded Loan.

The lender can obtain a “business purpose declaration” from the borrower to the effect that the purpose of the loan is for business purposes only, to prove that it can be deemed a Non-Coded Loan. The Lender also needs to make reasonable enquiries into the purpose which could be done by siting evidence of the use of funds. For example, requesting evidence of an invoices and then paying that invoice at settlement to ensure the funds are used for the approved purpose.

In private lending, you must make sure the loan is going to be Non-Coded under the terms of the NCCP Act. It is therefore important that you understand the difference between the two classifications.

For further information about private loans for business projects, give us a call on 1300 856 683 or contact us via our Contact Us page.

The Role of Private Lenders During the Coronavirus Crisis

Private lenders and coronavirusAustralian businesses have had a rocky start to 2020, to say the least. Businesses still recovering from the impact of the bushfires are now having to face cancelled events, dwindling customers, reduced rental income and supply chain disruptions as a result of the coronavirus outbreak. It’s taking a real toll on companies, particularly SMEs.

While there are an array of measures being introduced by the Government to keep businesses going during this period, there are still some companies that aren’t eligible for support or their needs fall outside of the scope of relief packages. Banks are also helping customers with pausing interest repayments and waiving fees, however again, not everyone is eligible.

Private lenders have always had a focus on business lending and supporting small businesses and this is no different during this period of disruption. Particularly, private lenders are able to help those businesses who fall through the cracks. Here is some information about the ways private lenders can support businesses during the Coronavirus crisis.

Funds to tide you over

The financial needs of an SME during a crisis are varied but generally it is the necessity for short-term support until things get back to normal. Requirements can include:

  • general cash flow to keep the business operating, paying employees or progress projects
  • purchase of assets or investments
  • funding developments when banks are too slow or put up too many hurdles, such as presales

Because private lenders rely on an ‘exit strategy’ we don’t have to assess the borrower’s serviceability. A short-term fall in cash flow or profitability doesn’t impact our assessment of the application.

If the borrower has a genuine business purpose, sufficient equity in a property and a realistic exit strategy then they are likely to be approved for a loan.

Loans over $250,000

New business loans backed by the government are currently being made available to businesses affected by coronavirus across Australia. These government-backed business loans under the recently announced Coronavirus SME Guarantee Scheme, are loans of up to $250,000 that are available to eligible Australian SMEs. These loans will all be unsecured with terms of up to three years with no repayments required for six months.

Any businesses looking to borrow over $250,000 won’t be able to access this scheme and will need to seek other finance options. While the banks are still an option, they will likely be inundated with requests from businesses who are eligible for the scheme which means that accessing finance will take longer.

Private lenders can assist borrowers who are looking to borrow more than $250,000 and don’t want to wait the lengthy periods of time that banks take to approve a loan. With interest rates at all-time lows, a short-term private loan is more affordable than ever.

Waiting for JobKeeper

The JobKeeper Payment is part of a $130 billion wage subsidy scheme from the government to support businesses significantly affected by the Coronavirus and help keep more Australians in jobs. Almost half the Australian workforce should be eligible to receive the JobKeeper payment of $1,500 (before tax) per fortnight.

However, many businesses are blaming confusing exclusions, uncertainty about which employees will be eligible and the yawning gap between when they must start paying staff and getting reimbursement from the tax office.

Private lenders can help businesses while they await the JobKeeper Payment reimbursement to arrive. A private loan is ideal for short-term loans and can greatly assist keeping the business going and keep paying staff while the government organises the JobKeeper payment.

Increased construction costs

Despite a negative outlook on the industry from many analysts, construction in Australia has continued to go ahead and property prices have remained steady. Construction has been one of the few industries able to continue during lockdown periods and is considered a critical part of the economy as Australia recovers from the pandemic. However, rising supply costs are causing issues for developers, particularly as projects come close to completion.

Private lenders are able to assist with completion costs for developers who may have experienced supply cost increases. A short-term loan can enable a developer to complete a project and finalise sales.

While the Coronavirus crisis has created less than ideal circumstances for businesses there are ways to keep operations going during these tough times. Private Mortgages Australia has seen an increase in demand for short-term from businesses experiencing difficulties due to Coronavirus and expects this to continue while government restrictions remain in place. For further information about how we can assist you or your clients then please get in touch with General Manager – Relationships, Shanta Lobo on [email protected] or 1300 856 683.

PMA Coronavirus Update

Still lending.

There’s a lot of conversations being had about the effects of COVID-19 on the property and finance industries so Private Mortgages Australia thought we’d provide a quick update on what is happening within our business.

Director Tony Barbone has put together this short video and there’s more information below:

Business as usual
While a lot of business are moving to remote working this is something that PMA has always done. Therefore, we aren’t having to make changes to our processes or working situations so we are able to carry on as usual.

Small change to LVR and pricing policy
To better place ourselves in the market we have slightly lowered our accepted Loan-to-Value Ratio and have made changes to our pricing policy for Registered First Mortgages (R1M) and Registered Second Mortgages (R2M) as follows:

LVRs

NOTE:  Higher LVRS may be considered on application. Lower LVRs apply for non-major metro areas and will be assessed on a case-by-case basis. 

*Standalone security only. All other sectors will require additional security.

The PMA difference
In the current climate we expect funding for other lenders to become more scarce as investors hold onto their cash. However, at PMA we’re different in that we make the lending decision. So once we’ve made an offer that’s it, we don’t then need to scramble to find investors which can often lead to settlement changes and delays.

We’re also backed by a wholesale funder who have committed up to $100M to finance our portfolio of first mortgages. So we’re confident that we’re going to be able to continue to lend and are expecting an uptick in business borrowers who can’t obtain finance elsewhere.

If you have any questions, please get in touch at [email protected] or 1300 856 683.