Happy Customers
Property investment rarely follows a straight line these days. Portfolios grow and get more sophisticated and complicated. Sooner or later most serious investors and developers find themselves in territory where major banks aren’t equipped to handle their financing needs.
Unusual income structures, commercial and residential assets held under the same entity, these are the kinds of scenarios where standard mortgage applications fall short, and where the help and expertise of a finance broker becomes valuable.
The difference between a deal getting done and a deal falling apart often comes down to one thing: lender fit. At Hodgestone Finance, we work with a broad panel of lenders, from the big four through to non-bank lenders in Sydney, private lenders in Brisbane, and specialist credit providers across the country. We know that complex deals require more than just a competitive rate. They need the right lender, structured the right way at the right time.
This article is going to walk you through exactly how we can make that happen for you, if you ever find yourself in a complex situation.
What Makes a Deal Complex?
In private lending, a deal is considered ‘complex’ when it falls outside the boundaries of ‘cookie-cutter’ underwriting standards that the traditional banks use. These deals require specialised or rapid solutions to close. Deals such as these generally involve high risks, non-standard borrower profiles or unconventional security.
Complex Borrower Structures
Deals involving entities rather than individuals add layers of legal complexity. You can have trusts and corporate structures, which require evaluating the trustee’s authority and the trust deed. This is to ensure the proper security is taken over assets.
Deals where the borrower has complex financial arrangements, such as related party loans, require heightened due diligence looking at conflict management and legal enforceability.
Specialised or Distressed Security
Not all security is straightforward, and if your loan involves a non-standard asset, it's important to understand what that means for your application.
Properties that fall outside the norm, such as those requiring significant construction, or those with planning permit uncertainties can carry a higher risk for lenders and will require expert valuation and careful management.
Security doesn't always have to be property. Assets such as heavy machinery can also be used, though they add complexity to the process and may affect how a lender assesses the deal.
Distressed assets can also be considered as security. These loans are often structured specifically to turn around underperforming assets, and as such they require very careful planning, particularly around lender liability in the event of a borrower default.
Tight Timelines
The immediacy of a loan can make the process complex as well. Traditional banks are well known for being slow on the approval process, which is why private lending can be the way to go for developers needing money to close a deal fast. Such speed can mean things get missed or certain factors not taken into account.
Bridging finance requires a very clear short-term exit strategy as well.
Intricate Loan Structuring and Legal Issues
Some loans may cross jurisdictions, especially for large corporations or developments. This could involve foreign tax laws.
Mezzanine and subordinate debt adds another layer of complexity. Structuring a debt that sits between the senior debt and equity requires careful negotiating of warrants and intercreditor agreements.
Essentially a complex deal is one that can’t be automatically approved. A lender is forced into meticulous investigation and evaluation of property value, a borrower’s strategy and the legal security to properly assess the risk involved.
Why the Right Lender Matters More Than Lower Rates
With the regular banks, finding a great rate is often the goal, as the loans are long term and based on your earnings. The more money you can save, the better. However, with private lending, the right lender matters more. Private loans are usually needed for time-sensitive deals, such as property development or acquisitions. Speed of execution, certainty of closing and tailored flexibility to the borrower is far more important than the cost of the capital.
Reliability and Certainty
A private lender can settle in as little as 48 hours. This works well for bridging finance or if there is an auction you need to attend and win.
Lenders that Hodgestone Finance can find you have a good reputation, we have a trusted relationship with them. You know that, even with all the complexities and risks involved, you can rely on getting the finance for what you need, when you need it.
Tailored Flexibility is Better Than Rigid Criteria
The right lender will focus on the equity in your project, not your credit score or serviceability. They often accept non-traditional income sources to help service the loan. They can provide you with interest-only repayment schedules while you wait for the sale of a property. They can match your specific and complex cash flow needs.
Transparency and Avoiding Hidden Costs
Private lenders often have no hidden fees. Some predatory lenders may quote a low rate but then slip in establishment fees, exit fees or administration fees.
The private lenders we work with have a reputation of being open and honest with you. By laying all the costs upfront so you know what you’re in for, and no hidden surprises, it gives you financial peace of mind and allows you to budget appropriately.
Understanding Your Borrowing Profile
Your borrowing profile with a private lender is a different idea from the profile traditional lenders work out. Banks and other traditional financial institutions use an income-driven assessment model. Private lenders focus on the quality of the security, such as real estate, and if there is a clear and viable exit strategy.
The four key things a private lender will look at for your borrowing profile include:
- Asset/Collateral. This is the biggest factor with a private lender. What is the value and equity of property that can be secured against the loan? Private lenders focus on a LVR to ensure they will be able to recoup money if a borrower defaults on a loan.
- Exit Strategy. Usually, a private loan is a short-term loan, so there must be a clear path to how you will repay the loan in full. This can include refinancing with a bank if your financial situation improves.
- Borrower Profile and Capacity. Private lenders conduct a manual investigation into bank statements, tax returns and other such documentation showing your ability to manage cash flow.
- Purpose of the Loan. Private lenders are often used for bridging finance, property development, or business expansion, rather than standard owner-occupied home loans.
How Brokers Negotiate Terms on Your Behalf
What does Hodgestone Finance do for you? We act as an expert intermediary for you. We leverage our industry knowledge and established relationships with various private lenders to secure better prices, better rates and better conditions for you. We take the emotion out of the equation so logic can dictate the best terms for you.
We help you define your objectives. This helps us establish a clear goal in mind that you want to achieve with the pending loan. It makes it clearer to the lender what it is they would be putting the money into, and what risk they would be subjecting themselves to.
From initial offer through to final settlement we can help handle the documentation. This lifts a lot of stress from your shoulders, allowing you to focus on the project and the success that will bring.
What to Expect When You Work With Us
Every engagement will start with a conversation, so we get to understand your project, what assets you bring, the structure, the timeline of the deal, and what success looks like for you. From there we can match your scenario with the right lender, and present you an offer that speaks directly to how that lender underwrites risk.
We don’t farm your application around to everyone, hoping for a catch. Instead we know which lender will most likely say yes, on terms that work for you. We manage the documentation and the communication and work proactively to resolve any issues that may arise.
The sooner you talk to us the better it will be for your project. We work with investors, developers and business owners all across Australia who need more than just a standard loan. Get in touch with the team here at Hodgestone Finance and let’s explore your opportunities.
We find you the suitable loan that works for you.
Take the first step toward financial freedom with our quick and hassle-free loan process. Apply now and secure your ideal loan.
