How does the private lending process work?

It’s no secret that the banks’ can be slow, with the lending process often taking 6-8 weeks to be completed. Greater flexibility and quicker turnarounds are major reasons borrowers often prefer to work with private lenders when obtaining finance. In a recent survey we found that nearly 50% of brokers had decided to work with a private lender because their client needed fast access to funding. This may be because they have an urgent business opportunity, need to quickly refinance some debt or require an injection of funds so they can finalise a project. Access to quick funding is often the difference between being able to take advantage of an opportunity or missing the boat.

So, how exactly does the private lending process work then?

Private Lending Process

Step 1. Submit application form

The Borrower or Referrer fills in the Quick App Form (found here) which includes details about the business, the individual borrower/s, loan amount, loan purpose and real estate assets and liabilities.

Step 2. We conduct initial assessment

We look at the details provided and see if it is possible for us to offer a loan in the provided circumstances.

Step 3. We issue an Indicative Letter of Offer

We provide the Borrower with and Indicative Letter of Offer which gives the details of how much we are willing to lend, the terms of the loan and the interest rate. If the Borrower decides that the Indicative Letter of Offer is suitable to them then they pay a small assessment fee ($550 to $770 inc. GST depending on complexity) to cover costs for searches that we need to ensure that everything is in order for us to move ahead with the loan.

Step 4. Conduct due diligence

Due diligence involves assessment of the applicant, loan structure, security position and exit strategy. There are a number of documents we need the Borrower to send us  to complete these tasks which are included on this checklist here.

Step 5. Issue Letter of Offer

Once we have conducted all the necessary checks and searches we will then issue a formal Letter of Offer. This includes the final interest rate, expected disbursements at settlement and details of any outstanding conditions to be met prior to settlement (if any).

Step 6. Settlement

Once the Borrower has accepted the Letter of Offer loan documents are prepared and sent to applicant’s solicitor by email. Upon return of the fully executed documents the approval fee, legal costs and prepaid interest are deducted from the loan and the balance can be paid by the next business day, sometimes sooner.

Referrer fees are paid within 24 hours from settlement with no clawbacks.

 

We endeavour to make this process as quick as possible and depending on the complexity of the loan can move from the initial application to settlement in as little as 5 business days – possibly sooner. If your client requires quick turnaround on a loan then make sure you get in touch with Senior Relationship Manager, Shanta Lobo at [email protected] or call 1300 856 683.

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.