We see a lot of applications for development finance and the first question we ask ourselves is, “Why is this not bankable?” More often than not the introducer will site the lack of pre-sales or limited equity. These two reasons are understandable, but we find through our investigation, we usually uncover further issues which are generally logical flaws. When assessing an application we run through a particular thought process, that we believe all introducers should run with when assessing a development application. These are:
For development loans of $5,000,000.00, there may not be the development time to make it worthwhile to arrange a simultaneous application for the bank and private funding because by the time the project triggers bankability the development is nearly finished. But for all other loans that have sound feasibility and are light on equity and / or pre-sales, it is always beneficial to arrange a dual funding option that allows the borrower to switch to bank funding by taking out the private lender when the bankability targets are hit. The net benefit to the developer should always benefit from such a strategy.
And herein lies the key, you must choose a private lender whose rates and fees are flexible enough to enable a refinance switch mid-development without incurring costs that negate the benefit.
Contact us on 1800 SEMPER (736737) or enquiry@semper.com.au