The Big Banks Said No | CCG
CCG Peer to Peer Lending Australia
Banks Not Lending for Commercial Development Loans
Imagine for a moment that you are a bank; a developer with over 20 years’ experience and a balance sheet in excess of $700 million approaches you for a loan. He can show a net income for the past five years of approximately $20 million per annum. What do you say?
Apparently, the answer is 'no'. Even though the developer is quite clearly bankable, mainstream banks are reluctant to lend to the development sector. Considering the royal banking commission, you might wonder if that's a smart move.
The developer, however, made a very smart move; he secured a $26 million development loan from longstanding Non-Bank Lender (NBL) and credit facilitator, Credit Connect Group (CCG). The loan was financed using investment funds from a number of private individuals who achieved a very attractive return on their capital of 11% net pa.
The experienced Sydney-based development company, which has been borrowing from CCG for over a decade, was now able to proceed with plans for 55 townhouses in the western Sydney suburb of Schofields.
Clearly, it was a win-win for the investors, the developer and CCG and a huge loss for the bank.
Referring to the developer's experience, balance sheet and net income, CCG Director Peter Benson said he was quite clearly creditworthy.
"However, due to the banks' reluctance to lend in the development sector, we are seeing more of these types of borrowers approaching us for financing," he said.
"We introduce these prime lending opportunities to our registered network of sophisticated and wholesale investors for funding at fixed rates of return between 6-12% net per annum, with first mortgage security.
"These investors essentially act as the bank and hold the mortgage over the property. The entire loan process is completely transparent and investors are able to undertake their own due diligence prior to investing. They pick and choose the loans that best suit their investment needs and goals. We manage the borrower, loan, and security asset on their behalf.”
Loans for Non Residents
Mr Benson believes property developers have been the hardest hit by the banks limiting their exposure, with many now also unable to sell their apartment stock to the once lucrative non-Australian resident market, as these purchasers are simply unable to obtain finance here.
As a result, Credit Connect Finance - the Australian Credit License-holding entity within the group - launched a Non-Resident Home Loan product, including Off the Plan, and House and Land Packages, to address this need.
CCG Loans for Non Residents
"We want non-conforming borrowers to know there are legitimate, alternative options available to them when big industry shuts its doors,” Mr Benson said.
Since 2006, the group has underwritten approximately $285 million in property loans for amounts ranging from $50,000 to $70 million. The group's portfolio includes loans for construction and development, commercial and residential property, and non-resident home loans.
The smart money would say CCG will be getting even busier in the future; things are not looking good for the mainstream banks. Analysts IBISWorld believe that, as a result of the banking royal commission, banks will be hamstrung with higher capital requirements, tighter regulation and higher costs.
IBISWorld also believes the banks will try and pass on these higher costs to clients, which is only likely to gather further bad press. Despite passing on costs, however, the analysts are predicting declining revenues for the banks over the next five years.
As banks face their worst crisis since the global financial system floundered in 2008, it will be the Non-Bank Lender that picks up the slack and offer alternatives to those seeking loans. We are likely to see many more NBLs opening their doors over the coming months.
Whilst this is good news for borrowers and investors, it pays to do your homework. Established companies like Credit Connect Group have proven experience and complete transparency. They can show you real results, giving you confidence in your investment. The newer NBLs are only just establishing themselves.
I know where I'd be putting my money.
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 facilitated 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.
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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.