19 Oct ‘The Great Refinance’ and ethics in private lending
In recent weeks we’ve seen news articles referring to ‘the great refinance’ and the rise of private lending in Australia’s property market.
With this mainstream exposure comes greater scrutiny, and it’s good for the industry, says IBN Private Managing Director, Scott Roberts.
“Australia’s private lending sector is estimated to be worth more than $3 trillion, however its lack of regulation lends an air of mystery that can negatively impact confidence,” says Scott.
“As more businesses turn to private lending, we’re seeing capital flowing into the industries most impacted by the current economic environment, especially property and construction.
“It’s been a lifeline for many of our clients, particularly those needing to refinance debt, reposition their portfolio, or land bank for the next market cycle.”
Scott says the private lending sector is tight-knit, and brokers, accountants and insolvency experts quickly learn who to trust, and who to avoid, when referring their clients.
“The non-banking sector is a self-cleaning oven. In the absence of a regulated industry, reputation and experience counts,” he says.
“But that doesn’t mean brokers or borrowers should rest on their laurels. If a private lender, or lending platform, isn’t acting in your best interests, then find one who is.”
Scott says there are five questions brokers need to ask when looking at a private lender.
- How long has the business been operating?
- Is the business licensed?
- Do they have a physical office address?
- What is their reputation? Do your research.
- What is the size of their loan book?
“Beyond this, collaboration between brokers and lenders is key,” he said. “A significant portion of our work comes through via our broker network and our job is to make theirs easier – we work closely with them to understand their client’s desired outcomes and get them to ‘yes’ faster.
“Collaborating leads to increased transparency, enables tailored solutions for each client, and increases everyone’s likelihood of success.:
Private lending in its purest form, says Scott, hasn’t changed since the Neolithic Revolution.
“All lending should be mutually beneficial,” he said. “It was set in stone 4,000 years ago, and about the only thing that has changed since then are the interest rates.
“As a borrower, your goal is to advance yourself whilst having a trusted lending partner by your side, to give you the confidence to take that step.
“As a lender, it is in your best interests to see the borrowers succeed and repay their debt, although there are times when clients may need to lean on your benevolence. You need to understand your clients’ goals and objectives – it’s only a win if you’ve both benefited.”
Established in 2004, IBN Private is Australia’s most experienced private funding specialist, providing commercial funding solutions for property developers and business owners Australia-wide, specialising in projects valued between $2 million and $200 million.
The group draws on its own funding, together with more than 250 private funders and investors, ranging from large superannuation funds to Managed Investment Schemes.
For more information visit www.ibnprivate.com.au