Individuals and companies have a significantly better chance of obtaining finance successfully when using an originator as opposed to sourcing finance through traditional lenders themselves. This is according to Gary Palmer, CEO of Paragon Lending Solutions, a non-bank asset-backed lender, who points to bond originator Ooba’s March results, which reveals that individuals and companies have a 76% chance of success when applying for finance through an originator.
“This statistic indicates the high chance of obtaining finance successfully through an originator and highlights the benefits that originators can offer businesses and high net worth individuals in need of short term finance as they are able to approach numerous financial institutions to source the best possible solution.”
Palmer says that restrictions and red tape often involved in finance applications to banks usually result in a lower approval rate. He says that as a result more businesses and high net worth individuals are opting to use originators to obtain commercial property and business funding transactions, and he has witnessed an increase of businesses requesting origination services over the past few months.
“Paragon recently originated over R300 million worth of commercial property loans in a month, as well as assisted a leading retailer in South Africa restructure their current facilities by originating a R30 million deal.”
He says that banks are continuously changing their strategies to focus on either residential or commercial property loans, fees and commissions or unsecured lending. For example, certain banks are currently the market leaders in residential property, whereas other banks are more commercial property driven.
“The bank’s changing strategies are confusing to clients and make it difficult to really understand how to approach and apply for a loan. Clients are also unaware of how to best formally present their applications, especially with commercial property applications, which are more complicated in comparison to other types of finance applications.
“Clients choose to approach originators for short-term funding requirements as they are able to secure finance that suits the individual’s specific circumstances and negotiate the best interest rate on behalf of the client.”
Palmer explains that finance applications are often slowed down by banks due to various procedures and regulations which they need to abide by. “This lengthy process can result in a business not having sufficient capital available within the required time period to purchase property or stimulate business growth.
“Finance intricacies such as access bonds, the fixing of interest rates and bank fees are not always easy for businesses and consumers to understand. Originators are also able to offer support in the form of financial education to their clients.”
Palmer says that originators are in a better position to motivate applications on behalf of clients as they understand how financers scrutinise applications. “Originators know what an applicant needs to successfully obtain a loan as they deal with banks on a regular basis and are familiar with their strategies and what they are looking for. They also perform relevant administrative tasks, liaise with accountants and mediate with banks and attorneys on behalf of a client to ensure the timeous processing of applications.
“Should irregularities be found when compiling the documentation, the originator is also available to guide the client as to which procedures are best to follow before submitting the application to the bank,” concludes Palmer.