Private Loans
Private funding is the act of receiving a private loan or non-bank loan.
This could be from private investors, boutique lending firms, and solicitors’ funds, and are usually collected and pooled by the fund manager. Our brokers take the hassle out of private loans so that you have the time to focus on what’s important.
What you need to know about private loans
Typically, private loans have higher interest rates and establishment fees when compared to your more typical loans like home loans, car loans, or construction loans. This is due to the higher risk associated with this type of lending. Private loans are generally short-term loans for example between 3 and 6 months; however sometimes that can be for up to 12 to 24 months and beyond.
Usually, private loans rely on a clear exit strategy to pay out the loan. This could include the sale of assets, refinancing, or a clear cash flow.
How much can you borrow with a private loan?
The amount you can borrow with a private loan is assessed case by case, however it can be anywhere from $1 million to $50 million.
Who should apply for a private loan?
Generally speaking, customers with a decent amount of equity in a property or property portfolio and irregular forms of income would apply for a private loan.
The pros of private loans
1. Turnaround time
Often, private loans have a fast turnaround time. They can take as short as two weeks from initial application to funding, and sometimes even less. This means that applying for a private loan can mean super quick access to funding.
2. Funding certainty
Because private investment firms often have a deep pool of private investors as well as their own funds, you can feel confident in the certainty of your private loan funding.
3. Consolidating debt
Individuals or businesses can take out private loans to pay off their ATO debts or debts from potentially hostile creditors.
4. Mainstream banks have been holding back
In the last few years, mainstream banks have been holding back on development / construction lending due to the volatile nature of the current market. Due to this, property investors and developers have struggled to obtain funding for their projects, and have been left to turn to private loans as a solution; regardless of the higher rates and fees.
5. Equity without refinancing
With private loans, borrowers can avoid refinancing everything as some private lenders will provide funding against a 2nd mortgage or caveat.
6. Financials may not be required
This means less documents to collate and a shorter application process for borrowers.
