Search

Financing FYI: If you’re a business owner, property investor or project developer (March 2021)


Topics:

1. Government loan scheme $5mil

2. Special Situation Lending

3. Your property investment finance strategy

3. What if I am a Property Developer?

4. How does the home loan market affect us?

Last week the government has expanded its guarantee SME loan scheme to allow up to $5mil loan, with up to 80% guarantee provided by the government to hopefully encourage commercial banks opening up funding to businesses, aiming to boost business investments, refinance previous debt, buying a commercial property or acquire another business.

Some banks offer business acquisition loans, and if it’s not property backed up to 50% of acquisition cost is possible, while the LVR can be higher if you can bring along property as security.

Other than bank loans, there is an emerging trend of alternative capital being allocated to the innovative kind of debt instrument to fund business activities, namely Special Situation Lending.

What is Special Situation Lending (SSL)?

Unlike Venture Capital, SSL is a debt instrument, a mechanism whereby capital is brought from High Network Individuals or Family Offices to fund a deal or a business that is non-bankable, while the “story“ justifies a risk adjusted return to the lenders.

Special situation lending is a growing trend, and emerging funds with abundant capital seeking attractive yield is the major players in the current market.

In SSL, it can be secured by real estate or non real estate asset, not unusual with other asset sitting in the balance sheet of the business or the borrower - could be inventory, receivables etc that can be easily monetised to repay debt in the event of default. And it’s common that SSL deal relies on management expertise and historical financial performance of a business to make things happen.

Your property investment finance strategy

Banks loans are very cost effective. But for whatever reasons you might have that doesn’t suit banks appetite, don’t give up.

Make good use of the alternative lenders who cater for long-tail market in your financing strategy. Whether you’re buying a property or funding your next big thing or to resolve a temporary time-critical cash flow issue.

Home and Commercial property lending by Non bank lenders:

1. Nimble in size relative to major banks hence faster turnaround

2. Appetite for major banks declined deals

3. More personalised service - banks do improve this with tech

4. Different rule to assess borrowing capacity

SME lending by Non bank lenders:

1. Great for non-trading asset holding companies

2. Great for SME owners only needing short term cash flow and not lock into years of loan term

3. Great for SME owners who need to access funding within days

4. Great for SME owners to resolve temporary financials before refinancing into other lenders products

What if I am a property developer?

There is definitely more appetite to fund property developments across various states in Australia, including land bank deals. Banks are also keen on construction loans with flexible policy. Check line fee, utilization fee, and discharge fee etc before you sign. Confirm your pre-sale level for debt coverage, or seek non-bank lenders if you need it quick, timing and fast-to-market is critical in this environment.

How does the home loan market affect us?

Meanwhile home loans market is frenzy and affordability is definitely not improving. Some popular take ups in the home loans market:

1. Faster turnaround and better borrowing capacity

2. Some go up to 85% LVR without insurance cost (yes including investment)

3. Great fixed rates

4. Remember, credit default always have a solution! Don’t give up

5. Alt doc is popular among self employed people to get into the property market

6. Refinance rebates are still being offered by some banks and lenders

In saying that, increased appetite in home loans market is good news for property developers.

N1 team is your strategic finance partner

Our team has over the years developed deep experience in various sorts of financing strategies, such as alternative lending, banks loans in both residential and commercial, and complex home loans transactions.

We act for various private investors, we run a mortgage fund, we are a mortgage manager and we have a team of brokers who understand other banks products in the business sector, commercial and residential properties.

www.n1holdings.com.au

www.n1funds.com.au

renwong@n1holdings.com.au

7 views0 comments