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From Broker to $285 Million Non Bank Lender

 

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Peter Benson’s Switch from Mortgage Broker To Launching His Own Private Mortgage Lending Company in Australia CCG

The Opportunity

Developers Missed Opportunities

Long before the banking royal commission was launched in December 2017 there were problems. Businesses, particularly, were frequently coming up against brick walls in their mainstream banking transactions. 

For developers, the biggest problem was generally timing. It can take weeks, even months to arrange finance through a traditional lender, causing frustration and, often, missed opportunities.

This was a problem Credit Connect Group Director Peter Benson identified a long time ago; it's the reason why he switched from being a mortgage broker to launching his own multi-million-dollar private lending company.

 

Private Mortgages Australia

Peter first got into the finance business back in 1992 whilst selling real estate. Proving even then that he was a man who liked to find solutions, he noticed it was often difficult for clients to obtain finance for certain properties.

"I was working with a law firm as a finance broker and, as such, was approached to finance all different types of loans, including private loans. Basically, my role was to find borrowers who needed finance, such as personal loans, car loans, home loans, development loans etc. The law firm's role was to ensure all the security and mortgage documentation was completed," Peter said.

"My lawyer at the time was dealing in 'private lending', where he had clients that provided finance for various properties. His clients ended up financing some of the loans I was seeking funding for."

But still, Peter was frustrated by the system. "I felt I needed to have something to offer that made me different to all the other finance brokers out there. I had just started in the private finance sector but realised, if I had all the funds to lend - like a bank - I could advertise, and all the finance brokers would contact me to borrow from my private lending clients."

Settlement Within 2-3 Weeks

Early on, it had been much easier for people to borrow money. There were no aggregators or accreditations, you simply contacted your local bank manager and sent him or her the loan proposal.

But as all this changed, and the business became a minefield of compliance issues and lending approval processes and procedures, Peter felt he could offer something better.

"I decided it was much easier just to deal with my private lending clients and have borrowers approach us directly for the funding they were seeking. A lot of other brokers are now realising that's much easier.

"One of the biggest problems with the traditional money lending process was and still is timing. This is probably the major difference between a non-bank lender and a traditional lender. In most cases when a broker approaches a traditional lender, you must first be accredited with an aggregator and meet their compliance obligations. The aggregator then submits the deal to a traditional lender, who will take two to three weeks just to assess the loan. Inevitably they will then come back with several questions, so the process takes even longer.

"A non-bank lender, on the other hand, can typically have loans terms issued to you within a week of submission with settlement within the two to three weeks. Without a doubt non-bank lender loans will get approved and settled a lot quicker," said Peter.


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Banks not lending for commercial development loans

The Demand

Not for Everyone

Being a smart businessman, with over 20 years of investment and lending experience, Peter did his homework thoroughly before launching the highly successful private lending firm, Credit Connect in 2006.

He knew for sure the demand was there, and that it would continue to grow.

"Our loan enquiry levels are increasing on a monthly basis simply because the banks are not lending in the commercial, development and non-resident sectors, or residential interest-only loans," he said. "These are typically the loan requests we see from brokers, who commonly say the bank or aggregator has had the deal for two months, but they still can't get a commitment from them for lending terms.

"I don't understand why banks can't just be upfront and clearly advise the broker/borrower that they can't assist for whatever reason (i.e.. APRA direction for foreign and non-resident borrowers), instead of simply providing excuses and delays which frustrate everyone. Most brokers we speak to would much prefer a prompt, direct answer."

Peter is proud of the fact that they do things differently at Credit Connect Group. "We have found that giving a quick honest answer to our borrowers, if we have an interest in funding the matter, is far better than dragging it out for months."

We're talking serious amounts of money here, as Peter's company has the capacity to write loans from $50,000 to $70 million. And serious clients are more than happy to pay higher fees for the many advantages the non-bank lending sector offers.

One client they recently advanced a $26 million loan to had a balance sheet of $700 million and an income in excess of $20 million pa and the developer elected to borrow from Credit Connect as opposed to a bank.

"Certain clients are happy to pay higher fees for the speed and flexibility to get their loans funded. That said, the fees and rates really aren’t that much higher than what a bank can offer. I have noticed over the last two to three years that many borrowers have certain interest rate figures in their mind and, if the terms offered are higher, will simply walk away from properties or projects as opposed to settling on the loan terms offered," Peter said.

 

Industry Leader

Clearly, Peter was ahead of his time; he was one of the first to explore the possibilities of non-bank lending.

"There are definitely more non-bank lenders in the market now than when I first started in this business in 1992. The majority of non-bank lenders back then were law firms who lent their clients funds. I worked for two law firms myself," he said.

But even with this increase, there's a lot more growth ahead in the private lending sector.

"I read a statistic last year that stated people in the US had more of an understanding of private lending and most had actually chosen to borrow from a non-bank lender instead of a traditional lender, given most traditional lenders did not want to lend after the GFC. Most Australians don’t know or fully understand what non-bank lenders are yet."

But Peter's certain more and more people will move away from traditional financial institutions for lending in the future. Will this be as a result of the banking royal commission?

 

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Peer to peer lending first form of lending in Australia


Royal Banking Commission and Non Bank Lenders Australia

"It's common sense that no lender wants to lend to a borrower who can't meet their obligations. Firstly, you could be held up seeking possession by the Ombudsman for months, maybe years. Then if you do take possession of a property you could be exposed to potential losses when you sell it. What lender wants that?

"I think we are currently over-regulated but the royal commission is only going to see more regulations imposed on banks and lenders.

"When you see AMP charging the Estates of people who have passed away and clearly lying to ASIC, and Bank West being told to place loans into default to meet certain CBA banking requirements, this is clearly wrong. We hope the royal commission will recommend certain fines, implementations and procedures to these institutions.

"But having said that, as a non-bank lender, why should we be burdened with these procedures? We are lending our own funds, undertaking all our own due-diligence and clearly deciding on the borrower and property, should we choose to advance the monies.

"Non-bank lending was the first form of lending ever done prior to banks being established. Private people simply gave other people a loan. It should not be subject to the same compliance, license and reporting obligations as the banks.

 

CCG

Credit Connect Group of companies is one of Australia’s most respected private lending firms today, and this success speaks highly of Peter’s expertise and experience.

Since 2006, Credit Connect Group of companies have underwritten approximately $285 million in property loans for amounts ranging from $50 thousand to $70 million. Their portfolio is comprised of loans for construction and development, commercial and residential property, and non-resident home loans.

On the other hand, as a non bank lender, CCG can typically undertake an appropriate suitability assessment and have loan terms issued to you within a week of submission.

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Important Information:
All loan applications are subject to Credit Connect Group of companies’ normal credit assessment and loan suitability criteria. Terms, conditions, fees and charges apply.

This information is for general education purposes only and is not intended to constitute specialist or personal advice. It is not intended to be a complete statement of all information and has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should consider the appropriateness of the information to your own situation and needs before taking any action. It should not be relied upon for the purposes of entering into any legal or financial commitments.

Peter holds a Diploma of Financial Planning and is PS146 compliant. Credit Connect Finance Pty Ltd ACN 113 576 891 Australian Credit Licence 396190


 

Author Bio: Queensland-based business journalist Isobel Coleman considers the options for commercial property loans, commercial development loans, and loan for non-residents.

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