Non Bank Lending for Melbourne
What could you achieve if you had the backing of a family office? We provide urgent no credit check, no doc private lending solutions for Melbourne businesses & property developers.
Royce Stone Capital lets you work directly with a family office that are exclusively part of the RSC family. What this means is that you can get urgent funds, get better terms and develop a long term relationship with a coaligned capital partner! Where could you be with that sort of backing? Speak with us today!
What is private lending?
Private lending is where a private finance business, institution, family office or HNW investor directly provide their own capital to borrowers, without the limitations of banking requirements or regulations. Because it is a private market, different lenders have different criteria for various transactions. These transactions are usually for commercial reasons and fall outside of bank lending laws. The private lending market is known as the secondary lending market, or shadow banking system, and is an integral to providing liquidity to the overall financial system. Without it the banking system wouldn't survive, as the private lending market takes on transactions that carry a higher risk profile, than mainstream banking transactions. We provide private mortgages, to businesses and investors, that require funds for commercial reasons. Because we work with family offices we can provide solutions that most lenders can’t, urgent capital at short notice and capital that is coaligned for the long term. Speak to us today, to see the difference.
Who is eligible for private lending?
Royce Stone Capital provides private mortgages for business owners, property developers and investors who require to borrow funds for commercial reasons. Because our investor base is family offices and HNW investors, we understand the challenges faced by those in business, and we provide coaligned solutions to ensure you success. To be eligible, you must have a borrowing entity that is a ABN, company or trust structure and the use of funds must be for commercial purposes only. Speak to use today, so we can make sure you get the best solution for your situation.
What is the difference between bank lending and private lending?
Bank loans have to follow responsible legal lending laws and self-imposed lending metrics, which means they are inflexible in providing solutions to business borrowers. This includes security requirements, credit checks, serviceability requirements and extensive documentation. These solutions often take months to get approved, but come with the benefit of a lower cost of capital. On the other hand, private lenders usually provide funds within the fortnight, have flexible repayment options, and have less stricter lending metrics regarding serviceability. With these benefits, comes a higher direct lending cost. However, one thing that is often overlooked, is there is a high opportunity cost with bank funding. To demonstrate serviceability, you must crystalise profits sooner, which means paying more tax. Furthermore, the time it takes to get funding from a bank, could mean you miss out on business opportunities. So, in many respects private lending is often cheaper when all factors are considered for short to medium term debt compared to a bank. At Royce Stone Capital we provide no credit check, no doc loans, which means we only look at the quality of the security and exit strategy. This means we can provide you with delivered funds, quicker than you can meet your bank manager. Speak to us today!
What does a private loan do?
We firstly need to define what a private loan/ private lending is! In the vast majority of cases, a private loan is where a loan takes place between a private finance company and a business. These are essentially non-bank lenders, lending to businesses for commercial or investment purposes.
There are exceptions, for example If a private finance company wishes to lend to consumers, it can, but it must abide by the consumer national credit code. This affords the consumer certain protections and rights, so they are not unfairly taken advantage of.
Most private loans however are to businesses and not to consumers. Typically, these loans fall outside of the consumer credit code. This gives both the lender and borrower the flexibility to deal on much more flexible terms, that are business friendly. This also puts more responsibility on the borrower, to be responsible for their financial decisions.
These types of Private loans offer a wide array of financial products, from secured to unsecured loans for a variety of circumstances using various forms of security. For the purposes of this article, we will be discussing non-coded private loans for business and investment purposes only.
Private loans can include first mortgage private loans, second mortgage loans, construction loans, specialised asset loans and a range of other products such as cashflow lending / invoice financing.
When do i use a private loan?
A private loan should be used when you are unable to get bank funding, or when the bank can’t meet your specific needs. A private loan should be seen as sprinter. You only use them for a short duration of time, 1 to 5 years.
Bank funding on the other hand, should be seen as a marathon runner. Where loans can go up to 30 years in duration.
Both have a time to be used and for certain situations and comparing them like for like isn’t fair to either product.
Because private loans are more expensive than a bank, they should only be used when the return on capital is greater than the cost, or the inconvenience solved is greater than the cost.
For example a business owner requires an urgent $1M to take advantage of a business opportunity that will make him a 30% return, but he can’t wait 3 months for the bank to approve a loan.
Or a property developer requires extra funding to complete a project, and if he doesn’t get the necessary funds the whole project will be delayed and will cost him more in holding costs.
How are private loans repaid?
Most private loans are interest only, and this allows for borrowers to have a better free cashflow position, than if their loan repayments were principal and interest.
What this means, is that most of the time private loans are interest only, or their interest is capitalised!
If a loan is interest only or interest has been capitalised, this means on maturity of the loan, the whole loan principal plus any unpaid interest must be repaid!
This is why private loans are used for a short to medium term duration, because they are typically designed for investment and commercial purposes, where there are large repayments for goods or services.
Some private loans especially cashflow lenders, can be repaid over 3 to 5 years, consisting of principal and interest repayments.
How your private loans is repaid, will largely depend on the financial product you are getting, the lender you are using and the quality of the underlying security. The better the quality of security you have, the higher the likelihood your repayments will be interest only.
What are the benefits of a private loan?
At Royce Stone Capital can settle a loan quicker than the time it takes for you to meet your bank manager!
The main benefit of a private loan is the ease by which you can get urgent money. Most private lenders can settle within three weeks, and some within 5 days.
The second benefit of a private loan is that in most cases unlike a bank, your credit score isn’t an issue most private lenders are security focused.
The third benefit is private lenders don’t look at your serviceability but only your exit strategy!
The fourth benefit is you have certainty of funding, and do not run settlement risk waiting for a bank credit committee to approve your deal.
The fifth benefit is you can be agile and take advantage of opportunities to make money.
What are the costs of a private loan?
Private loans are generally more expensive than bank funding or second tier loans, because the lender is fundamentally taking on more risk. This is because they are performing less due diligence on serviceability, and are offering more business friendly terms which they need to be compensated for.
As you build a relationship with your private lender, you will find that they offer you better terms to keep you as a repeat client, and over the long run you will find the benefits of having certainty of funding, far outweigh the costs.
