Whether you are a commercial or residential builder, any project you work on will need to be financed by someone. When big banks are the financiers, quantity surveying services can ensure that drawdown reports and progress claimsare all in order and that you are staying on schedule. This principle becomes a bit more relaxed, however, when a private lender is involved; but what is a private lender? And how can a quantity surveyor help ensure everything stays on track?
Private lenders — a big-bank alternative
A private lender can be an individual or private business that loans money to those who may not be able to gain approval from a bank. The criteria for borrowing from a private lender tend to be simpler compared to well-known banks and lending organisations, making it an easier and quicker alternative for some, especially if time is a factor.
Why consider a private lender?
There are several reasons why an individual may seek a loan from a private source.
Approval cannot be gained from a big bank
This is a common reason — gaining loan approval from a big bank can be a lengthy process with multiple documents that must be officiated and approved. This can in some cases take too long, and by the end of it, there is no guarantee of approval.
Credit ratings, living expenses, income and loan type are just a few of the factors that influence a bank’s decision to grant a loan. In some instances, it could be a small element that may not have even been considered by the applicant that could jeopardise a loan.
A loan is needed right away
Due to the lack of red tape with private lenders, loans can not only be approved but also transferred in a fraction of the time it would take when going through a big bank. This can be highly desirable for those looking to secure a loan right away or even those who require some last-minute extra funds.
They can offer specialised loan options
Private lenders can offer specific loaning options that are suitable for niche situations; a bridging loan is an example of a type of home loan a private lender may offer, which is a short-term solution for those looking to purchase a new home before or whilst they are selling their existing one.
A Caveat loan is another specialised option whereby property or an appropriate asset is used to secure the loan against; the payback period is predetermined before the loan is approved. Caveat loans are very short-term loans (typically around two–three months).
Some considerations before engaging a private lender
Whilst there are some beneficial perks to engaging a private lender, there are also some considerations that should be made prior.
Private lenders are predominantly short-term loaners
Whilst it is possible for private lenders to provide some long-term loans, their specialty is typically in providing loans that range from as long as two months to two years. If your client is renovating a string of units, for example, over a short period and is looking to sell or lease them out, then a private lender would be ideal.
Private lenders tend to be popular with property developers who are planning to yield a fast turnover so that they can pay the lenders back as soon as possible as well as forego any interest that becomes applicable.
Private lenders have high interest rates
Along with the short-term loan frequency, there will also be higher interest rates — this compensates for the fast-tracked approval and transfer of said funds as well as the fact that even applicants with bad credit scores can still borrow.
How a quantity surveyor can help
Working on a project that is financed by a private lender will not greatly affect your construction practices — and in some cases, may actually improve them as you may not have to wait for approval of the next fund allotment before moving onto the next phase. Engaging the services of a quantity surveyor means you can dedicate your full attention to the day-to-day tasks and leave the meticulous financial operations to us.
A drawdown report, for example, may not be necessary when a private lender is the financier, but can still offer invaluable advantages in terms of time & financial management as well as looking at the larger picture.
High-calibre quantity surveying services
Section 94’s team of registered and experienced quantity surveyors are available Australia-wide and can provide accurate cost estimations and comprehensive section 94 reports with impeccable professionalism.
Give us a call today on 0413 953 869 or email [email protected] to find out more about our quantity surveying services.