The introduction of non-bank lenders into the property market has been a boost for property investors, buyers and business owners. However, a number of those eager to get into the commercial market are losing out on potential deals due to the perception that non-bank lenders are too expensive or they are not aware of the role that non-bank lenders play in the commercial lending sphere.
This is according to Gary Palmer, CEO of Solutions, a short-medium term commercial lender, who says that while there is value to be found in certain sectors of the commercial property market, some investors may struggle to obtain finance quick enough.
“The current economic environment is favourable for obtaining finance for property deals while yields and cap rates remain attractive in certain sectors of the property market. However, due to stricter regulations imposed on banks resulting in slower turnaround times to approve loans, some investors are not able to secure a deal in time.”
He says that many property investors may be neglecting to use non-bank lenders.
“There is a misconception of the role commercial non-bank lenders play in the commercial lending space. Potential property players, as well as small business owners, may think it is too expensive to utilise or that repayments are inflexible and obtaining the required finance is an arduous process. However, this perception is changing as consumers become more educated about the services that are available to them.”
Palmer says that as a result, an increasing number of property developers, buyers, investors and businesses are using non-banking lenders as a temporary option to the banks to help secure short-term working capital for commercial purposes in a very short period of time.
“Non-bank lenders are no longer seen as a lender of last resort, but as a mainstream method of facilitating transactions while a bank application is being processed. They offer the client the breathing space until the client is in a position to sell their asset or settle through the refinancing by a bank once all the bank’s criteria have been fulfilled.”
Palmer explains that more clients are opting to use non-bank lenders as they become more informed of the benefits of using them.
“We’ve noticed an increase in enquiries from clients who require finance for commercial means and are opting to apply for short-term finance in anticipation of a bank loan or transfer. This is because they require short-term liquidity for working capital, which can be approved within 36 hours and in certain circumstances pay out within 10 days of meeting a client.”
He says that although these clients have strong balance sheets, they may not have quick access to finance. “Our clients prefer having the advantage of flexible repayments, being able to lend more if need be and are prepared to pay a slight premium in anticipation of their bank loan for a quick turnaround time and quick access to funding to secure the deal.
“The advantage of short-term lending allows buyers, investors and business owners to take advantage of commercial opportunities, as well as to negotiate better deals.”Palmer concludes.