Today’s market offers a wide range of financing options, each with advantages and disadvantages in terms of response times, rates and fees, preconditions, and other finance terms, whether you’re looking to finance the purchase of a site, building and development, or residual stock.

To assist, we have outlined some of the benefits and drawbacks of the various lenders and how this may impact your project.

Banks

Customers’ deposits can be accepted by banks, credit unions, and building societies, which can then utilise them as capital to finance lending. They may offer borrowers some of the most competitive interest rates on the market due to this inexpensive source of capital.

In Australia, there are more than 100 such authorised deposit-taking organisations. They offer a variety of commercial property finance options, as well as teams of bankers that can explain to clients how they might become loan eligible.

The Australian Prudential Regulation Authority (APRA) is in charge of policing these conventional lenders . They tend to be slow and risk-averse when evaluating finance requests because they are so strictly regulated.

This indicates that they are cautious in their lending restrictions, offering lower loan-to-value ratios (LVRs) and more stringent loan terms than other financiers. They also indicate that they won’t consider proposals that don’t adhere to their strict guidelines.

Non-Banks

A finance provider without a banking licence is known as a non-bank lender. They obtain their cash by other means since they are unable to accept deposits from clients. Others, like property syndicates, are organisations of investors who combine their funds for investments and lending. Some raise money from wholesale funders.

Interest rates and costs charged by non-bank lenders are typically a few percentage points more than those charged by banks. However, they are able to customise loan terms to fit specific borrowers, accept higher LVRs, and offer considerably faster approvals since they are more adaptable and flexible than the major institutions.

Because they are more concerned with the merits of a project and proposal than a borrower’s personal finances, they also provide low-doc loans (which require less verification and paperwork) and innovative products created especially for real estate developers, like zero-presales construction finance.

The Australian Securities and Investment Commission (ASIC), which makes sure that all financial institutions operate “efficiently, honestly, and fairly,” has severe standards that apply to non-bank lenders even though they are not subject to APRA governance like banks are.

Private lenders and investors

High-net-worth individuals or family offices are examples of financiers who manage their own money and are therefore not accountable to shareholders or outside investors.

As a result, they have the discretion to lend or invest as they see fit, and they may decide to support initiatives that encounter funding challenges from banks. These investors can be a somewhat expensive source of financing for property development since they demand a high rate of return to cover their risk.

When it comes to enforcing the conditions of loan agreements with borrowers, some private bankers might be rigid. Private lenders might be quicker to activate default provisions that give them the right to impose penalty rates and fees since they are not required to act as prudently as financial institutions, which have reputations to uphold and governance norms to follow.

The right choice for your next project

Contact the CreditMax team for assistance if you’re confused how to proceed in negotiating the optimal funding arrangement for your next project.

Since we’ve been in operation for more than ten years, we’ve developed solid working connections with hundreds of banks, non-bank lenders, and private investors, many of whom don’t accept applications from borrowers directly. We are aware of who is looking for what kind of project and developer at any given time, and we are aware of the factors that are important to them when making investment selections.

We take pride in guaranteeing the finest results for the developers we deal with, having resolved financial solutions worth more than $3 billion countrywide. We can assist you in determining your funding choices and customising your finance proposals to increase your likelihood of obtaining the best terms.

Our areas of expertise include residual stock loans, mezzanine financing, land bank financing, and construction and development loans. Beyond arranging financing for developers, we offer our clients a comprehensive end-to-end service that includes knowledge of real estate law, strategic counsel, and project management support.

Request a discovery call with the CreditMax loan team to learn more.