How Do Non-Bank Lenders Work?

How Do Non-Bank Lenders Work?

Non-bank lenders operate differently than traditional banks in the realm of property development finance.

Here are some important aspects to understand about how non-bank lenders typically function in this context:

  1. Flexible Lending Criteria

    Non-bank lenders tend to have more flexible lending criteria compared to banks.

    They are often more open to financing projects with higher risk profiles, such as land development or renovations. In their evaluation, they consider factors beyond just credit scores, such as the project's potential profitability and the borrower's experience in property development.

  2. Speed and Efficiency

    Non-bank lenders offer faster approval processes and expedited access to funds.

    They employ streamlined application procedures and decision-making processes, enabling borrowers to secure financing more swiftly than with traditional banks.

  3. Collateral and Loan-to-Value (LTV) Ratio

    Non-bank lenders typically require collateral to secure the loan, which can be the property being developed or other assets.

    They assess the loan-to-value (LTV) ratio, comparing the loan amount to the appraised value of the property.

    Non-bank lenders often have higher LTV ratios than traditional banks, allowing borrowers to access a larger portion of the property's value.

  4. Higher Interest Rates and Fees

    Non-bank lenders generally charge higher interest rates and fees compared to traditional banks.

    This higher cost reflects the increased risk they undertake by financing projects that may not meet the stringent criteria of banks.

    It is crucial for borrowers to carefully assess the cost implications and ensure that the potential profitability of the project justifies the higher borrowing costs.

  5. Shorter Loan Terms and Payments

    Non-bank lenders frequently offer shorter loan terms than banks.

    The repayment schedule can vary, but it is not uncommon for non-bank lenders to require more frequent payments, such as monthly or even weekly instalments.

  6. Relationship-Based Approach

    Non-bank lenders place importance on a relationship-based approach. They take the time to understand the borrower's specific needs and customise the loan structure accordingly.

    This more personalised approach provides greater flexibility and adaptability throughout the property development process.

  7. So how does Assured Management (AML) work?

    AML is a non-bank lender in South East Queensland, Australia. We can work directly on a personalised level with property developers is what sets us apart from other lenders.

    Direct access to the people who are approving and monitoring your loans gives you assurance and confidence as the borrower. This creates a proactive line of communication that puts AML in a good position should any intervention or involvement become necessary to help make your project a success.

    AML is not a bank and doesn't purport to be one; unlike traditional financial institutions they have a dynamic and commercial mindset with the flexibility and capacity to problem solve and work closely with our developers to reach the shared objective; to finish projects in a timely and cost-effective manner.

If You're A New Developer, Seek Advice

It is important to note that these aspects may differ among various non-bank lenders, so it's a good idea for borrowers (especially if you are new to property development) to conduct research and compare multiple lenders to find the one that best aligns with their needs and project requirements.

Seeking guidance from a mortgage broker or financial advisor experienced in property development finance can also be beneficial in understanding if applying to a non-bank lender is the right choice for your circumstances. Here are some more tips for inexperienced property developers.

Find out more about how property development loans work here.

 

 

About Assured Management

Assured Management (AML) is a flexible, non-bank lender with the ability and expertise to work directly with property developers to complete projects in a timely and profitable manner. 

We provide tailored construction finance solutions and property development loans for:

Needing advice on your development finance needs? Get in touch below.

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