First things first, what is private lending? Private lending is a form of business finance where specialised Private Lending companies, like Central Real Capital, lend money to borrowers. It often involves less stringent requirements than conventional loans, making it an attractive option for borrowers who have exhausted all other available options such as traditional banks, and require prompt settlements.
In Australia, private lending is predominately used for business or commercial purposes. Businesses often require speedy settlements and instant cashflow to cease profitable opportunities.
How private lending works, generally the lender provides the funds to the borrower based on the borrower’s security position. They will consider things like your property value, equity, and your ability to pay back the loan through an acceptable repayment strategy.
How Private Lending Differs from Traditional Loans
Traditional banks operate under strict government regulations. You fill in the requested information, and the algorithm determines if you should qualify for a loan or not whereas private lender loans have greater flexibility with their decision making about loan criteria.
When it comes to security and collateral, traditional banks usually operate with fixed requirements based on your loan and your credit history, but not private lender loans. Private lenders are more lenient with what you may use as collateral.
While you still need to provide personal information on your application, your acceptance or rejection isn’t relying on your credit score.
Traditional banks are not geared toward personalised, flexible terms. You owe a specific amount, and you have a firm timeframe for repayment. How private lending works, they look at the various factors in your proposed loan life cycle, whether prepaid or serviced.
For businesses in need of a more flexible financing option, private lenders in Sydney like Central Real Capital can offer tailored solutions with quicker turnaround times.
The Private Lending Loan Application Process
Let’s look at what the loan application process is like when applying for finance and how lending money privately works.
Step 1: Submit an Enquiry Form
As the borrower, the first step for applying for a loan is filling in an enquiry form outlining the loan amount, loan purpose, and any assets and liabilities.
Step 2: An Initial Assessment is Conducted
The lending team will then promptly review the details provided and assess if it is possible to offer a loan.
Step 3: The Issuance of an Indicative Letter of Offer
If the lending team determines that a loan can be offered, an indicative Letter of Offer will be issued to the borrower. This letter will outline the details such as the loan amount, the terms of the loan, and the interest rate. If the borrower proceeds with the Letter of Offer, they will then pay a Commitment Fee to cover the cost of due diligence which is required to move ahead with the loan and deducted from the loan establishment fee.
Step 4: Due Diligence
The lending team will conduct due diligence. This involves assessment of the applicant, loan structure, security position, and exit strategy.
Step 5: The Issuance of a Letter of Offer
Once the lending team has conducted all the necessary checks and searches, a formal Letter of Offer will be issued. This letter lists items like the final interest rates, the loan terms, and details any outstanding conditions.
Step 6: Settlement
Once the borrower has accepted and signed the Letter of Offer, loan documents are then prepared and sent to the applicant’s solicitor. Once the fully executed documents are returned, the balance can be paid to the borrower within the next business day, sometimes even sooner!
Key Benefits of Private Lending
It’s no secret that traditional banks can be slow, with the application and lending process often taking at least 8 weeks to be completed. Greater flexibility and quicker turnarounds are some of the reasons borrowers frequently prefer to work with private lenders. Access to quick funding is often the difference between being able to take advantage of an opportunity or not.
Some other key benefits of private lending include:
- Flexible Loan Terms
- Faster Approval Process
- Less Stringent Eligibility Criteria
- Tailored Solutions for Unique Borrowers
- More Personlised Service
- Quicker Mortgage Application
