Budget 2017: Changes to stamp duty hits Victorian developers

Budget 2017: Changes to stamp duty hits Victorian developersChanges to stamp duty concessions in the latest Victorian budget and restrictions from banks on developer finance are driving property developers to seek alternatives for finance.

The 2017/2018 State budget has introduced changes stating that from 1 July 2017, purchasers of off-the-plan commercial properties or residential investment properties (not yet constructed) in Victoria will be liable to pay stamp duty on the purchase price or the market value of the property (whichever is greater). This will not affect owner occupied off-plan purchases.

Until now, Victorian purchasers of real estate that was not yet constructed were only required to pay stamp duty on the value of the land and any improvements that were already constructed on the land, as at the date of the contract. The value of any construction or refurbishment that was carried out on or after the contract date and before settlement was disregarded for the purposes of calculating the purchaser’s stamp duty liability.

Under the proposed new regime, purchasers of commercial properties or residential investment properties who enter into an off-the-plan contract of sale on or after 1 July 2017 will be liable to pay duty on the purchase price or the market value of the property (whichever is greater).

This will have a significant impact on the purchase price feasibility for property investors and the confidence of developers to attract sufficient pre-sales to obtain financing in the current challenging lending environment. Furthermore, obtaining finance for development projects has become even more difficult with banks placing stronger restrictions on lending and increasing serviceability requirements.

Property developers are copping blows from both sides, however there are still options for obtaining finance for projects from alternative lenders like Private Mortgages Australia. The flexibility of non-bank lenders will be an attractive option for developers who are finding it difficult to access a loan following the restrictions being put in place by the banks.

To discuss developer finance please get in touch with Private Mortgages Australia.

Share

Brokers can achieve 50% market share for business loans

Brokers can achieve commercial and business lending origination

The Finance Brokers Association of Australia (FBAA) has said that brokers can achieve 50 per cent of commercial and business lending origination.

The FBAA’s executive director Peter White said that brokers in Australia “have every opportunity to follow markets like the UK [where brokers have around 70 per cent market share] and dramatically increase origination market share”.

He said: “The high level of professionalism and best practice engaged in Australia under our regulations, and genuine concerns for skilled conduct producing best outcomes for borrowers, is a recipe for more and more borrowers using brokers.”

As an advisory board member for the Small Business Association of Australia (SBAA), Mr White said that opportunities exist for brokers in the small business sector to improve the service they currently provide.

“Many brokers are very proficient at business and commercial lending, but they need stronger knowledge skill-sets that deepen their understanding of how those loans function within business markets.

“If you are dealing with a borrower who is in an aged care facility, you need to understand the aged care market and its needs. Same with hoteliers, restauranteurs and motel owners, so you can speak their language and gain their respect.

“When you actually know their industry and market, you will own the right to their business,” he said.

This article originally appeared on SME Adviser.

Share

Funding options for settling a development site

Funding options for settling a development siteIn this guest post, PMA referrer, Dan Holden, Director of HoldenCAPITAL, writes about the benefits of using private capital to settle a development site.

Banks are very reluctant to get involved in lending against development sites. Some developers were getting sites funded as house investment loans because there was an existing house on the land they were purchasing. This was all too common until 2015, when the valuation industry was ordered to make a note wherever they thought the purchase was actually intended for a development project rather than a passive rental return house. The heads up from the valuer to the bank resulted in loans being declined if the bank believed it was for a development project.

Some of the reasons the banks are so reluctant to lend against a development site include:

  • An inability to prove the borrower can service the monthly interest, usually requiring 1.5 times interest cover from recurring income.
  • The main exit strategy is via a construction loan, which the banks are now only doing on a selective basis.

Banks take a view that they will only lend up to 75% of total development cost for the construction loan, and the land in a development project should typically takes up less than 20% of the total development cost. If they were to advance monies against the land, then they are reliant upon the developer putting in further cash to actually convert it into a construction facility. Being reliant upon a developer to find more money down the track is not a palatable credit answer. To put that in numbers, if you had a $10 million TDC project and the land was $1.8 million, the bank is only going to lend you $7.5 million to build the project. So if you don’t have $2.5 million now, they won’t rely on you finding it under your pillow in six months’ time.

We have seen a rise in developers using private capital to get these loans completed quickly and without the fuss of proving serviceability or an exit strategy. The cost of capital is higher at 15%p.a. however, at a lower LVR and/or with a robust sponsor we have been able to secure 12%p.a. While 15%p.a. sounds high, it is typically just for 4-6 months while the developer finalises his BA and any marketing, so the overall burden to the project is fairly insignificant. It is also better than using cash for that period and if you’re an elite property developer, you would want to see your cash invested at better than 15%p.a.

Dan Holden is Director of Holden CapitalDan Holden – Director, Holden Capital

HoldenCAPITAL is a specialist construction finance group, recognised as a market leader through its successes in deal structuring and the sourcing of debt and equity solutions.

Dan has over 13 years of development and finance experience which includes over six years in finance consultancy and funds management. You can contact Dan at [email protected].

Share

PMA makes new hire on back of stellar year

Royce Goh Senior Relationship Manager at Private Mortgages AustraliaPRESS RELEASE: 

Private Mortgages Australia (PMA), the specialised lender offering cost-effective loans to small-to-medium businesses, has hired experienced credit professional Royce Goh in the role of Senior Relationship Manager.

With 15 years of lending experience in Australia and overseas, Goh joins PMA from First Financial Services where he held the position of Mortgage and Business Loan Consultant. Prior to this he was the Asian Business Development Manager & Relationship Manager with NAB Business Banking.

“Private Mortgages Australia is experiencing incredible growth in the short-term lending space for commercial clients, so I’m really pleased to be joining them at such an exciting time,” said Goh. “The team are a great bunch of people who work with great brokers and borrowers and I’m looking forward to growing the business even further.”

In 2016 PMA saw a 210% increase in the number of loans settled and saw an 38% increase in the number of referrals coming in through referrer relationships. In order to accommodate this growth, PMA expanded the team with new hires, including Goh, over the last 12 months.

“2016 was a very exciting time for us at Private Mortgages Australia and with Royce joining us I can see the business getting bigger and better,” said Managing Director, Tony Barbone. “There’s been a real shift in the market with small-to-medium businesses realising that funding options are available if they get turned down by the banks. We’ve also seen many brokers diversifying into the commercial space which has seen more borrowers being introduced through referrer partners.”

“We’re expecting 2017 to be an even stronger year for us as many foreign investors look for alternative finance solutions due to the banks placing stronger restrictions on overseas borrowers,” continued Barbone. “Royce’s experience in Australia and abroad as well as his multi-lingual skills will make him the ideal person to help foreign borrowers find a loan that works for them.”

 

– ENDS –

About Private Mortgages Australia

Founded in 2014, Private Mortgages Australia (PMA) offers short-term, flexible loans to commercial clients that can’t get finance from the banks. Its transparent lending process offers quicker turnarounds than traditional lenders so that a business can get the best solution for achieving its goals. PMA offers first mortgage finance, second mortgage finance and caveat loans and can offer tailored solutions for borrowers who require urgent funding, have an ATO debt, are refinancing, are developers completing a project or are credit impaired.

Share

Refer now and receive an iPad Mini 4

PMA Christmas promotion

To celebrate this festive season, PMA is giving away an Apple iPad Mini 4 to brokers who actively refer good quality opportunities and connect with our business. All you need to do is refer two loans by 31 December 2016. Both loans must have an Indicative Letter of Offer Accepted by 31 December 2016. Maximum of two iPads per referrer. Get in touch to discuss your client’s needs now.

We’re open right up until Christmas day and have extra staff on board to help with the rush ahead of Christmas.

And don’t forget about our Referrers Rewards program. As part of this program, the value of all transactions settled with PMA will count towards your referrer rewards total and each time a referrer reaches a milestone they receive a reward from PMA – think a nice bottle of Grange, flights, shopping vouchers and much more. Each time a new milestone is reached there will be a bigger and better reward. Call us to find out more about the milestones and rewards – 1300 856 683.

Share

2016: A year to remember for PMA

The team from Private Mortgages Australia inlcuding Tim Hart, Tony Barbone and Peter Cuskelly.What a stellar year Private Mortgages Australia has experienced in 2016. In the last 12 months, We’ve seen a 210% increase in the number of loans settled in the last 12 months and, in order to accommodate this growth, have expanded our team with recent hires.

This year we’ve continued to develop great relationships with our referrers and have seen an increase of 38% in the number of referrals. To show our appreciation for the great work our referrers do we launched our Referrers Rewards program in 2016. As part of this program, the value of all transactions settled with PMA will count towards your referrer rewards total and each time a referrer reaches a milestone they receive a reward from PMA – think a nice bottle of Grange, flights, shopping vouchers and much more. Each time a new milestone is reached there will be a bigger and better reward. Call us to find out more about the milestones and rewards – 1300 856 683.

New digital presence

In 2016 we also launched our new website which provides information about the types of loans we offer and resources for our referrer partners. We’ve also made it possible for people to find out more about us through social media by joining Facebook, Twitter and LinkedIn.

To keep referrers informed we’ve held regular webinars throughout the year with our fourth webinar taking place on Thursday 8th December at 11am. You can register here.

End of year rush

The lead up to Christmas is the busiest time of year for PMA and we’ll be working right up until Christmas Day to ensure that our clients can gain access to the finance they need. To celebrate this festive season, PMA is giving away an ‘Apple iPad Mini 4’ to brokers who actively refer opportunities and connect with our business. All you need to do is refer two loans by 31 December 2016. Both loans must have an Indicative Letter of Offer accepted by 31 December 2016. Maximum of two iPads per referrer. Get in touch to discuss your client’s needs now.

Looking ahead to 2017

2017 is also looking like a very promising year in the private lending space. Further restrictions by the banks on foreign borrowers will force businesses to look to alternative solutions for their short-term finance requirements. While serviceability is the greatest concern for banks, private lenders like PMA are primarily focussed on securing the loan using property equity which allows them to be a lot more flexible and an ideal solution for foreign borrowers that can’t get bank finance.

We’ve also started to see the trend that many referrers are branching out into commercial broking and expect that the number of brokers we will be working with in 2017 will continue to increase.

We’d like to say a huge thank to all our referrers for your support in 2016 and we wish you all the best for the Christmas season. We’re looking forward to working with you again in 2017.

Merry Christmas from the team at Private Mortgages Australia.

Share

Benefits of working with a broker to access commercial funding

The benefits of working with a brokerIn this guest post, PMA referrer Gus Gilkeson, Managing Director of Grow Capital, writes about the benefits of working with a broker for small-to-medium businesses when trying to access commercial funding.

Obtaining funding for your small-to-medium business can be hard work. It takes a ton of time to do all that research, analyse your business needs, find a respectable lender, negotiate a deal you can live with, understand the terms of your financing, etc. That’s why working with a broker can be a really great idea. Brokers match up business owners and business lenders so that you can get the best outcome for your business. A broker could save you time, energy, and money, if you consider the costs of searching on your own.

Top 5 benefits of working with a broker:

Here’s five reasons you should consider working with a broker to access funding for your business:

1. Get the best rate. Brokers will work with lots of different lenders so that they can find the best rate possible for your financing.

2. Get the best solution. Sometimes it’s not just about getting the cheapest rate. A good broker will understand that getting the right solution is most important. For example, a short-term loan might be the best option. Your broker can help you look at alternatives to the banks that can offer specialised short-term finance.

3. Don’t sweat the details. This goes hand-in-hand with not wasting your time and effort. The point is that you can focus on running your business while your broker works on funding it. The nitty gritty? Let the professionals handle it.

4. They’re experienced. The best brokers have relationships with an extensive network of lenders and getting good deals is often all about having the right contacts. Plus, they’ll be able to tell quality deals from highway robbery — they’ll have seen it all before.

5. They’re knowledgeable. The finance world can be a confusing place with all the jargon and acronyms. However, a good broker would be in the know and could explain all the complicated terms and help you to navigate through the borrowing process.

Gus Gilkeson - Grow Capital

 

Gus Gilkeson is the Managing Director of Grow Capital where he helps Australian business owners, investors, and individuals harness their capital growth opportunities through funding.

Share

Banks now more lenient for SME loans, but still not as flexible as private lenders

Private lenders are more flexible for SME loansA recent article from Australian Broker stated that Australia’s major banks have introduced more lenient lending criteria to make it easier for small and medium-sized enterprise (SME) owners to purchase property.

Westpac announced it would increase its loan to value ratio (LVR) from 80% to 90% following similar changes from Commonwealth Bank earlier in the year. Westpac, CBA and St. George also all announced they would only require one year of financial records as income verification for self-employed borrowers. Previously they had required two years of financial records and tax returns.

SME loans need flexibility

While it’s great that SMEs now have more opportunities to access bank funding, they are still required to show serviceability which isn’t always possible. Similarly, for businesses that need quick turnarounds and short-term funding, a bank still isn’t going to be the right source for funds.

The difference between a bank and a private lender is that a bank focusses on serviceability while a private lender focusses solely on asset value and exit strategy. At Private Mortgages Australia all our loans come with a component or prepaid interest so we don’t need to worry about serviceability. This distinction is the main reason PMA is able to service so many SME loans for short-term finance.

If you have an SME client who can’t get funding from the banks, give PMA a call.

By Tony Barbone

Managing Director, Private Mortgages Australia

Share

Borrower Case Study: A super loan for a supermarket

PMA settled a loan with a borrower for the purchase of a supermarket Private Mortgages Australia settled a loan with a very happy borrower who needed a quick turnaround on finance for the purchase of a supermarket in country Victoria.

One of the key benefits of a private mortgage for this borrower was that PMA was able to lend based on the valuation price of the property rather than purchase price, which was ideal for the borrower’s situation. The supermarket had previously been bought three years ago for $950,000 however the borrower had managed to pick up the building and the business for a deep discount from a motivated seller for $680,000. This incredible discount was made possible because he agreed to buy the property very quickly and therefore didn’t have time for a traditional bank to take 6-8 weeks to approve a loan. While a bank would typically only lend on the lower of the valuation or purchase price, as a Private Money Lender, we are happy to lend based on valuation.

The valuation of the building came back at $950,000 and based on our due diligence we were happy to offer him a loan for 70% of the valuation of the supermarket being $665,000. The borrower needed the funds for four months to give enough time to refinance the property with another lender and cash us out.

Loan details

Loan Amount: $665,000

Mortgage Type: Registered 1st Mortgage

Loan to Value Ratio (LVR): 70%

Term: 4 Months

Managing the loan

We made sure we managed the deal as it came closer to the repayment date by sending the borrower a friendly reminder at 60 days, 30 days, and 14 days to expiry. This helped keep the lines of communication open and we knew exactly where the borrower was up to and had a clear view of his situation.

The borrower had a few unexpected delays from the incoming lender, but because we had constant communication with the borrower he was able to provide us with evidence of the new loan coming in and so we were comfortable giving him a small extension of two weeks to finalise his refinance.

Win-win

This deal was a great success for the borrower. He managed to complete the deal and make a huge profit. The borrower was so impressed with our service that he has subsequently came back and borrowed from us again  for a different project.

We are proud to say that we have many repeat borrowers just like the one in the above example, and this is because PMA provides a good customer experience with flexible criteria and our win/win approach to private lending.

If you’d like to find out more about how we can help you or your business clients with quick  access to finance then please give us a call on 1300 856 683.

Share

Q&A with Peter Cuskelly – National Credit Manager

Private Mortgages Australia National Credit Manager Peter Cuskelly.Peter Cuskelly is the National Credit Manager at Private Mortgages Australia. He joined in 2015 bringing with him his wealth of experience in credit across all types of lending including commercial, agribusiness, mortgage and personal clients.  We thought we’d take the opportunity to find out from Peter himself what’s involved in his role and what he’s looking for in a commercial finance application.

1. What made you decide to join PMA?

After a long career as a bank lender and a short time as a broker, I was attracted by the flexibility of PMA to do a deal that makes sense, rather than making the borrower/broker meet the rules and restrictions of bank lending policy. I also like PMA’s transparent approach making sure the broker and client stay informed along the whole process with no nasty surprises.

2. What’s some of the more common reasons why borrowers can’t get traditional bank finance and need a private mortgage?

Common reasons include poor credit record, inability to demonstrate servicing and speed to funding.

3. You charge higher rates of interest than traditional bank lenders. Why is the market prepared to pay private mortgage rates?

We provide a niche service to provide loans where the loan structure gives the borrower what they need and has a sound exit, but just doesn’t meet the strict criteria of the bank. Often our customers are entering deals that are very profitable, so they don’t mind paying a bit extra for the ability to get the deal over the line quickly.

4. Tell us about the type of credit PMA provides?

PMA lend for any legitimate business purpose. Our core business is short term funding from two to 12 months up to $2 million, however we are now also managing larger loans from $2 million to $50 million with our wholesale funding pool which has really opened up some great opportunities.

5. Do you have postcode restrictions?

No – PMA will lend against property anywhere in Australia however we do reduce the Loan / Value Ratio (LVR) based on the property type and use the Genworth Security Location postcodes.

6. What’s the maximum LVR you will go to?

Our maximum LVR is 75%.

7. What evidence of serviceability do you require from a borrower?

This is the key differentiator for PMA – we capitalise interest over an agreed prepaid term so the client doesn’t need to make regular payments during that period. Repayment is based on the borrowers’ ability to execute their “Exit Strategy” to repay the loan, rather than service the debt over a long term.

8. Tell me more about what you look for in an exit strategy?

The key things that I look for in an exit strategy are that it is realistic and can be achieved in the timeframe. For instance, if the exit strategy is to receive funds from a contract then we need to ensure the contract can be fulfilled and is large enough to repay the debt. A secondary exit strategy such as refinance or sale of security property is also usually sought as a back up.

9. How and when do you pay your referrers?

Referrers are paid 24 hours after settlement, with no “claw backs” for arrears or early repayment.

10. How quickly can you settle?

We can usually provide an Indicative Approval within a few hours. Caveat loans can be settled within 48 hours with a straight forward security and co-operative borrower. Registered first and second mortgage loans generally require valuations (and bank consent for 2nd mortgage) so will take longer.

11. How do you value the security properties?

PMA have a very flexible valuation policy which allows us to use a range of sources including existing valuations, desktop valuations and agent appraisals as well as full valuations depending on the lending scenario.

12. Do you do development finance? If so how does it work?

We get involved in development finance both as a construction financier and also on a second mortgage basis to assist completion when the banks won’t help fund cost overruns.

As with all PMA loans we are flexible and make sure our deal structure suits the requirements of the borrower.

13. What loan sizes do you do?

We are the exclusive Mortgage Manager for PMA Capital Ltd, which is our own Fund that specialises in loans up to $2 million. We can now also manage larger loans from $2 million to $50 million with our new funding pool.

14. What tips would you give referrers to give them the best chance of getting their application approved?

If you have a scenario you would like considered, please use our one page Quick App which provides us all the information we need to quickly assess the proposal and a basis to provide an indicative quote or discuss the deal further.

15. What was the most exciting deal you’ve worked on?

Exciting is not usually a word you use a lot in finance. I think the most satisfying deal was one where we worked with the client and broker to pay out the ATO and stop administrators being appointed to a sound business. The exit strategy of selling a property was finalised within the loan term. It was the perfect loan from start to finish.

16. What makes an ideal PMA borrower?

I think it is a borrower that is keen to work with us to get the funding finalised as soon as possible and then make every effort to carry out the exit strategy and repay the loan.

17. What do you think makes PMA the best at what they do?

Taking the time to listen to the broker and client and making sure the deal meet their needs.

18. What’s next for PMA? Any milestones you’re looking to achieve?

There is so much going on at all different levels. I think the rate of growth of PMA has been great and I am looking forward to doubling our loan book again over the next 12 months. From an operational perspective, we are building a custom software program to automate the assessment process and will shortly start looking for a new credit support staff member, to help manage the growth (and take up some of my workload).

 

Peter has a Bachelor of Business, Graduate Certificate in Corporate Finance and is a qualified CPA. He has over 30 years experience in finance and also holds a Diploma of Finance and Mortgage Broking Management, and has completed the Agile Project Management Foundation & Practitioner course.

 

Share