Author: Myadd

Tell us about Eastwood Securities as a lender and how you differ from other non-bank lenders? 

• The Eastwood Securities Mortgage Fund (ESMF) is managed by a team that takes a flexible approach to reviewing borrower applications.  We are not constrained by highly structured application processes. We provide a more customised service to Finance Brokers who engage with us.  If we are not able to assist, we determine that quickly so that no one’s time is wasted.

What are your target markets for short-term commercial loans?  

• Geographically, we consider locations Australia wide, including regional and rural property, as security.  
• Businesses we focus on include medium size enterprise across most industry types seeking ‘Intermediate Term’ or bridging funding support to achieve specific objectives.  

What are some of the typical projects or reasons customers are seeking loans for?  

• It is difficult to say that we have a typical borrower project focus, but a few examples include general debt consolidation, property purchases, ATO Tax debt settlement, discharge from administration by settlement of creditors, completion of partially constructed residential and commercial buildings, paying-out business partners during business separations and funding new business opportunities and expansions.

What are the different loan products you offer?

• ESMF provides commercial loans secured generally by First Mortgage over all types of real property.  These are intermediate term loans for bridging purposes allowing borrowers time to refinance to mainstream lenders or sell down assets to discharge their loan.
• Our loans are ‘interest-only’ and range from $100,000 to $5.0mil with loan terms between 6 months and 3 years.  Interest can be paid monthly or capitalised into the loan principal.

How does Eastwood Securities makes the loan process as simple as possible for brokers and their clients?

• ESMF provides personalised lending services to brokers including support for those who might require additional assistance managing private loan scenarios and applications. 

How quickly are you able to make a decision on a loan applications?

• We can issue indicative letters of offer for finance within 24 hours of receiving an application or scenario briefing.  Once required application information is received and security property valuations completed, it takes just 24 hours to issue a final letter of offer (unconditional) and move to documentation.  A further 48 hours and we can settle assuming existing bank loan discharges are not required.

What are the advantages for brokers wanting to diversify into the short-term commercial loan space? 

• Attracting new & retaining existing clients by providing more and superior client solutions and thereby growing their own business.

Tell us about your broker network and how you are reaching out to new brokers? 

• We operate with a network of finance brokers who focus in the non-conforming lending space.   Through a targeted approach, our staff make direct contact with brokers at various industry functions, calling and through our referral network.  Over ten years of operation we’ve found our most valuable referrers have come to us via a lot of personal contact work.

How can short-term lenders such as Eastwood Securities assist SMEs struggling with cashflow? 

• Eastwood Securities can provide ‘intermediate term’ loans to anyone who has property with significant equity.  And we are also able to provide ‘cash-out’ loans with interest and costs capitalised into the loan principal.

What do you think will happen in the commercial loan spaces over the next 12 months? 

• We see significant opportunity for growth in our lending space as businesses require more flexible financial solutions delivered in a timely manner to meet rapidly changing market circumstances.

It’s hard to believe the Eastwood Securities Mortgage Fund will be ten years old in June this year.  It’s certainly not going to be a milestone any of our team will forget in a hurry, with the most challenging economic, health and social circumstances any of us will have experienced in our lifetimes affecting how we do business.  Over this ten-year period, we have grown significantly and established robust and compliant business systems that will ensure our ability to address the current circumstances and assuring continuing high levels of service to our broker network and their clients.

Eastwood Securities’ place in the non-conforming private lending market is now well established.  With both investors and borrowers spread across all states and territories of Australia.  It is exciting to note that over the past years a significant portion of new commercial lending business emanated from referrals provided by our existing brokers and past borrowers.

The current economic challenge has led Eastwood Securities to launch a new short-term lending product that has been designed specifically to address the pressures and demands placed on small businesses in the current market.  The new Eastwood Securities product, “Relief Bridging Loans for Business”, is targeted at new and existing business borrowers that have equity in property.  This capitalized, fixed interest facility is aimed at providing working capital for businesses that need liquidity during the next six to twelve months with an alleviation of monthly interest commitments.  Loan terms generally range from a minimum of six months to a maximum of twelve months, but there is flexibility to work outside those terms on an individual loan basis.  This loan facility is available to all small business customers whether city based or regional and from any business discipline.

With our flexible and rapid loan application and review process we can provide funding to eligible borrowers in a timely manner minimizing cashflow risk to those businesses.  If a business owns or has access to real property with significant equity available and there is a viable exit strategy at loan term, Eastwood Securities will be able to assist.  Furthermore, if a business has multiple loans (secured or unsecured) Eastwood Securities can consolidate that debt making overall debt servicing more manageable.

Capitalised interest loans have always been an effective form of bridging finance for businesses with short term diminished cashflows.  There has been no greater example of when such facilities provide value, than what we are experiencing in this current extraordinary climate.  With the planned level of government support being provided to both small business and individuals, many are now projecting a more rapid recovery from the current situation once the worst has passed, enabling businesses to plan with greater confidence.

What are some of the common misconceptions surrounding short-term lending?

a. Generally, short term lending is associated with fringe lending activity such as Chattel loans, Caveat Loans, Payday lending and Personal Loans that are often unsecured and attract very high interest rates that can reach as much as 36% to 48% per annum and terms are usually 3 to 12 months.  These loans are often only a few hundred dollars to tens of thousands in size.  When most specialist lenders like Eastwood Securities talk about “Short Term Lending”, they plan for loans in the magnitude of a hundred thousand dollars to several million dollars, terms from six months to 24 months and expect security via a mortgage over real property.

b. Many people also see short term lending as low doc and not requiring the same amount of due diligence effort as longer term loans.  Most Specialist Lenders offering short term funding will require almost as much due-diligence as any full doc loan will require and the documentation to establish terms and security are equally significant. 

c. Furthermore, with the current requirements of responsible lending, there is just as much work in documenting short term loans under the NCCP as there is in setting up a longer term loan.

Describe the current market for short-term lending. Is it growing? What kind of clients are typical short-term lending clients?

d. Short term lending or bridging finance received its growth spurt as the GFC bit hard and banks tightened credit.  Basically the market for loans in the 6 to 12 month or so term is driven by borrowers who are in need of “Financial Repair” in order to present themselves as “ready for bank finance” again.  The introduction of new working capital is critical to achieve their short term business objectives.  While this specific market segment is not particularly transparent and is not well audited it is believed to be in the order of A$10bil in size.  It is greatly backed by private funding through an array of Registered Management Investment Schemes and Mortgage Funds.

e. I don’t believe there is a “typical” short term borrowing client.  Basically it could be any individual or business who has found themselves unable to obtain or maintain their line of credit from a bank.  Eastwood Securities which is a fairly  typical specialist lender providing short term finance has a list of borrowers that include, retailers, manufacturers, farmers, market gardeners, entrepreneurs, property investors, self-employed and contractors, restaurant owners to mention a few. 

What tips should brokers keep in mind when putting together a short-term deal?

f. Don’t underestimate the time really required for the loan. The most common trap is to set-up a facility for a period that does not allow completion of the objectives for the finance.  It can then be difficult and more costly to extend a short term loan rather than set it up for the optimum period at the outset.

g. Exit Strategy is a major concern for most providers of bridging finance.  It is critical that a clear and viable strategy is provided by the borrower indicating how the loan will be paid out in full at the end of its term.  

Are there any special skills brokers will need to put together short-term deals?

h. Flexibility – no two borrowers’ circumstances and requirements are the same leading to the need for lateral thinking in regard to how each scenario can be assessed.

i. Forensic skills – quite often the broker needs to be able to dig below the obvious issues to really understand what is going on with certain borrowers. It might be something as simple as where funds to service a loan a really coming from and on what basis the borrower has legitimate claim to those funds or whether or not a Trust or company has the authority to borrow money.

j. Patience and a Common Sense Approach – most importantly a broker may need to be patient as they work with the borrower to explore what formal information might be available to assist the lender verify credit background and what really transpired and serviceability of the short term borrower. If certain information is not available, we need to consider how else the background and credentials of that borrower can be determined.

What are some of the different types of short-term products, and how do they differ? What kinds of clients does each cater to?

a. Caveat Loans – may be a sound option for borrowers that need money fast and for a shorter period of months rather than a year or so.  However, interest rates are going to be in the range of 30% pa or higher.

b. Personal Loans – can be an option for people and businesses requiring smaller fund amounts and that have the time to work through the bank system in order to take advantage of a lower interest rate than would be achieved via Caveat and specialist lenders requiring mortgage security.  A limitation here would be loan size and the issue of banks not accepting the purpose for which the funds are required.

c. First Mortgages – cater to people who have fallen outside the bank funding environment and need a year or two to undertake “Financial Repair” before going back to the bank sector for refinancing.  Flexible terms are available and interest rates, while higher than bank rates, will still be manageable for an extended period of one to two years. Borrowers in this category need to have a suitable level of equity in the property that is to be used as security.  

d. Second Mortgages – provide the benefit of leaving in place an existing first mortgage bank loan at lower interest rates and just topping up against equity.  It can, however, be difficult finding lenders that are happy to take a second behind another lender at an acceptable interest rate.  Rates for second mortgages could be in the range of 18% to 24%.

The team at Eastwood Securities are pleased to announce we now have an office in Melbourne, the financial hub of Australia. Having a local presence in the heart of the Melbourne CBD places Eastwood Securities where we need to be as a national market leader in Private Funds Mortgage Lending. We also see Melbourne, and Victoria in general, as a significant opportunity for our future growth.

Private Money Lenders – Melbourne

We welcome all mortgage loan and investor enquiries and can be contacted on 03 9225 5189 during normal business hours.

Our new office is located at Level 50, 120 Collins Street, Melbourne Vic 3000.

New South Wales and most especially Sydney has recently proved to be the stand-out growth market for Australian real estate.  Sydney grew 14.3% compared to Melbourne’s 8.1% pa for the September 2014 quarter.  The big question is what is really driving this exceptional property value growth?

NSW has two significant factors in its favour at this time.  One is that it is the fastest growing state economy in Australia at 6.3% on prior year and population growth, driven by migration.  Furthermore, it is not so dependent on the waning resources sector as notable states such as Western Australia and Queensland.  On the downside, for investors, rental yields have fallen as rent rates have not kept up with the increase in property value.  Add to this the fact that while Sydney’s transport infrastructure received a major upgrade for the 2000 Olympics, it has not kept pace with demand in recent years and is becoming very congested!

The big question on peoples’ minds is how high can the Sydney market grow.  There are those of us who recall significant market correction resulting in downward value trends in double digit figures over the past 30 years.  The Sydney market can be quite volatile.  Having said that, there is support for projections as high as 13% for the 2014/2015 and 2015/2016 periods (QBE Housing Outlook report).  This projection is driven by the expectation of continued strong economic growth, continued population growth, a fundamental underlying shortfall in new housing starts and now, a new cycle of lowering the prime interest rate.

All the above growth for NSW and Sydney fly’s in the face of a National market that is expected to subdue during 2014/2015 with growth of around 4% down from 7% in the prior year (Fitch Rating’s Global Housing & Market Outlook).