Private lending: The truths behind the myths
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Leading private lender Aquamore announces the launch of its ‘myth-busting’ educational series, which aims to dispel prevalent misconceptions about private lending
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Australia has a robust economy, though it is not immune to geopolitical and global economic challenges. Brokers are increasingly well positioned to help business owners maximise the opportunities spurred by disruption (or, conversely, help minimise risk/damage for struggling businesses).
On this note, the majors are expected to continue to focus more on residential mortgages (much like in the US), with commercial lending directed to alternative lenders. The corresponding opportunities for brokers are to be in tune with market movements and become familiar with alternative commercial finance providers in this growth sector.
Aquamore is an established commercial finance private lender.
Founded in 2016, Aquamore provides institutionally backed, property-secured commercial loans (business and property), bridging loans and land bridging finance.
Aquamore consistently funds ‘out of the box’ businesses that may not be eligible for bank debt. Every deal is treated on a case-by-case basis, with the understanding that every client has a back story. As such, Aquamore is renowned for catering to a wide range of SMEs with its Full Doc product (ideal for well-organised clients with strong financials), an Alt Doc product (for clients seeking access to finance quickly, with minimal paperwork), and a No Doc product (for cash-poor, equity-rich clients). Aquamore’s commercial finance products are, in essence, very simple: a fully drawn advance for a period of up to three years, interest only. Loans are based on a judgemental credit approach versus being policy-based. In addition, Aquamore has no postcode restrictions and has a robust, institutionally funded warehouse that provides brokers with confidence that the company will be able to fund transactions up to $5m. The company distributes exclusively through brokers and is renowned for delivering quick, competitive and flexible lending solutions to support business growth, nationwide.
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Matthew Porch, Aquamore
Private lending is booming as the sector offsets traditional lenders’ tightened commercial finance credit appetite. Consequently, many business borrowers are becoming ineligible for the major lenders’ credit policies and increasingly seek fast, flexible alternatives, which is bolstering the demand for private lending. In addition, there is a steady increase in ‘prime’ clients with strong financials prioritising the speed of funding and actively turning to private lending.
That said, some brokers are still wary of private lending due to its legacy associations. Accordingly, leading private lender Aquamore announces the launch of its ‘myth-busting’ educational series designed to address common misconceptions.
Matthew Porch, Aquamore
“Private lending is an evolving market which has well and truly moved past its origins of being a ‘bottom drawer’ deal provider for borrowers with well-significant bad credit,” says Matthew Porch, head of distribution at Aquamore.
“We would never have forecasted today the types of deals that traditional lenders are rejecting. Increasingly, we’re seeing what would traditionally be considered a bank-quality deal come through. Aquamore is well placed to see past the risk and consider the deal wholistically.”
The first area the company is tackling in the myth-busting series is whether private lending is only for borrowers with bad credit. “This is unequivocally false,” says Porch. “Though it raises the interesting question: what is now considered as ‘bad credit’?
“It’s important to recognise that lenders’ perception of a borrower’s credit profile has evolved, and the term ‘impaired’ has changed drastically. Back in the day when the alternative finance sectors started to gain momentum in the early 2000s, it was often a time of loose assessment and sky-high interest rates when borrowers with a truly bad credit profile could obtain ‘lender of last resort’ funding. The levels of impairment, as well as the sector, have substantially matured since then. What was a ‘bank deal’ a year ago is often not the case today. Similarly, the level of sophistication, funding structures and associated compliance is now drastically different. This is particularly the case for private lenders with institutional warehouse funding as we not only have a responsibility to the borrower but a high degree of accountability to the warehouse provider,” Porch continued.
“The corresponding metrics to assess credit should also be raised. The traditional metrics to assess credit are very rigid and continue to tighten in the mainstream lending sector. Conversely, private lenders are renowned for taking a completely different approach. Aquamore applies a judgemental credit approach to all applications, which is the genesis of being able to provide solution-focused commercial finance solutions. In real terms, we understand that running a small business is never easy, and there’s a back story for every business – which is why we’re more invested in the future performance indicators versus categorically rejecting the application because of a default, late payment, etc. On this note, our main priority is that the funds will support business growth without placing additional strain on the business – which is why we also provide the option of capitalised interest,” he concluded.
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“Private lending is an evolving market which has well and truly moved past its origins of being a ‘bottom drawer’ deal provider for borrowers with well-significant bad credit”
“Aquamore applies a judgemental credit approach to all applications, which is the genesis of being able to provide solution-focused commercial finance solutions. We’re more invested in the future performance indicators versus categorically rejecting the application because of a default, late payment, etc.”
“Private lending is an evolving market which has well and truly moved past its origins of being a ‘bottom drawer’ deal provider for borrowers with well-significant bad credit”
“Aquamore applies a judgemental credit approach to all applications, which is the genesis of being able to provide solution-focused commercial finance solutions. We’re more invested in the future performance indicators versus categorically rejecting the application because of a default, late payment, etc.”
Leading private lender Aquamore announces the launch of its ‘myth-busting’ educational series, which aims to dispel prevalent misconceptions about private lending
Leading private lender Aquamore announces the launch of its ‘myth-busting’ educational series, which aims to dispel prevalent misconceptions about private lending
Private lending in the spotlight
Private lending is only for borrowers with bad credit: true or false?
Private lending is only for borrowers with bad credit: true or false?
Private lending in the spotlight
Private lending is only for borrowers with bad credit: true or false?
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Copyright © 2023 KM Business Information Australia Pty Ltd
Published 29 May 2023
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MYTH-BUSTING: PRIVATE LENDING
Top 10 questions to ask a private lender
While the takeaway is that bad credit is a loose term and the sector has become far more regulated, some lenders still have less-desirable reputations.
So, how do you know which private lender to trust?
Aquamore suggests brokers ask private lenders these questions to help boost confidence:
1. What is your source of funding?
2. Do you have the cash available now to fund the deal?
3. What fees/penalties are involved throughout the loan cycle?
4. What is your default policy?
5. What are your credit assessment criteria?
6. Are there postcode restrictions?
7. How long does your letter of offer remain valid?
8. What compliance do you require?
9. How quickly will you make a decision about the deal?
10. When can funding be released post-deal acceptance?
IN Partnership with
Matthew Porch, Aquamore