Importance of a Finance Broker in Getting Development Finance Explained!

Development loans are a specialized form of funding suitable only for the purpose of professional property developers and builders. It is important to understand that such type of commercial funding will definitely require the assistance of expert finance broker with right kind of skills and experience for the purpose of negotiating the loan on the behalf of the borrower. Benefits of hiring the services of the expert finance brokers in availing the development loans are explained in this blog.

Some of the reasons to select the professional finance brokers

If you want your development finance to be approved in quick and efficient manner, it is always wise to start the application process with an expert finance broker who holds expertise in their area of work.

  • Brokers can help the borrowers to secure the required loans so that borrower can fund all the different stages of the development/ construction cycle of any income property.

  • Brokers will help borrower to create a systematically executed business plan. It will set out the requirements of the development loan in the way that credit or lender providers wish to see.

  • They are better equipped with experience, knowledge and understanding of this domain to provide the borrower access to funds for their required construction projects.

  • Based on their experience of this domain, they can easily accommodate a much quicker credit decision for the borrower. To ensure that, they should be provided with all the necessary financial documents as soon as possible from the borrowers.

  • Some of the important documents require for securing a development loan are development experience, trade certificates and qualifications and the professional qualifications of the borrowers.

  • Borrowers in Australia know what the standard loan requirements for approval of the development loans in Australia.

The final thought

You must speak to an expert finance broker, if you are a professional property investor, builder and developer in Australia. They will help you understand the finance strategy required for funding any construction projects such as land subdivisions, retail property, industrial property, commercial property and residential construction.

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Start Your New Business Ventures in Australia with Efficient Capital Rising

Growing a business venture in Australia takes systematic planning, hard work, preparation and most importantly a continuous and robust source of financing. It is important to attract financing from venture angles, outside investors, banks, venture capital sources and more, in order to grow up your business venture in Australia and to take it to the acme of success.

Whether it is from financial institutions, a venture capital firm or a business angle, “capital raising” has got a lot to do with being able for selling your business idea. The best idea cannot take you anywhere if you fail to persuade your investor of the potential of your business model and your ability as an individual or business entity of making your business idea a success in least possible time.

Capital raising is significant to envisage the operation of new company and for arriving at a point where external capital providers in Australia can notice and feel the growth prospect of your new business model and enterprise.

Different ways to raise capital

Invoice factoring also seems to be an apt method where the future credit receipts and invoices get systematically transformed into instant capital. You can sell the credit card receipt or invoices and get fast cash in return.

You can leave the long lasting attachment. You can try to shed your attachment and make good use of the capital for helping your new formed company or start up to grow. For example, if you have vintage car, bungalow or any other assets, you can sell it to gain sufficient capital in order to help your newly formed organization to sustain for a longer period of time.

You can even try to make good use of your credit card for the purpose of obtaining all the capital you require to run your start-up business. One can make a little payment that will let him lift a hefty sum or a deal when he is much in need of a capital.

You can approach your family, friends and relatives for the purpose of attaining capital since they are your primary resource. In doing so, you should ensure that you get all your agreements in black and white.

The bottom line

Proper documentations of your deal will help you get capital with no interest rate and long repayment periods from your family and friends. In order to avoid any confusion or problems, you should always hold your end of deal if you are taking capital from your family and friends. You can return the amount once you get the finance or your company starts gaining sufficient profit in a long run.

If you require proper consultancy and advises on how to raise capital in the most efficient manner, then it is better to get in touch with Challis Capital. This reputed organization was formed for the purpose of creating a “capital partnership” between property industry participants looking for innovative financial solutions and the potential investors in Australia.

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Useful Things a Company Should Know About Mezzanine Debt

Most brokers and investors don’t really understand mezzanine loans and debt. The business owner has heard of it through an advisor or through their banker, but they still require more information for understanding how such finances or debt can work for them.

Eight things for businesses to know about the mezzanine loans & debt

Mezzanine debt is a multifaceted tool that can drive the growth of any business. Such funds can be used in numbers of ways where the traditional financing fall short. Such debts can be used in a number of ways where the cost of equity capital outweighs the return from a project. There are few things to know about mezzanine loans and debt that can help boost the value of any business organisation.

  1. It does not require a personal guarantee from the owner of the business. It is important to understand that the interest rate charged provide the lending agencies with sufficient return for the risk of the mezzanine loan.

  2. Debt providers are dependent on the management of the company that has borrowed the mezzanine finance. They are not interested in dislodging management of borrower’s company. Debt providers see themselves as patient investors who will precisely work with the management team of the business organization for getting through any challenging times. Duration of these loans is five to seven year maturity dates.

  3. Such loans have a long term focus. The money of the debt provider should be used for building up the profit of the business venture over the first three to four years. The borrower will be able to repay the loan or refinance the loan easily, if he does this successfully.

  4. Debt providers are partial to non-cyclical and stable companies, as their loan/finance is completely dependent on the cash flow of the business venture.

  5. It is almost unsecured by assets and does not have any collateral for protecting the value of the loan provided by the debt providers. Debt providers are placed in the second position beneath the financial agencies/banks in the capital structure of different companies.

  6. Lenders who provide mezzanine finance are concerned with getting back their principle loan balance as soon as possible. Debt providers make their return on investment primarily through the interest rates provided by the borrowers and secondarily through the upside on their warrants.

  7. The loan amount is views by the borrower as multiple of their companies’ EBITDA. The lower the multiple, the better loan amount is received by the borrower. Lenders see the loan amount as risk if the multiples are higher than expected.

  8. Lenders view the creditworthiness of any business through their stability of their company’s cash flow over a period time.

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Credit Enhancement Strategies Enhances the Chances of Credit Approval

Credit EnhancementMany businesses in Australia apply for loans at finance companies, banks or other leasing firm and are rejected at regular basis due to the high degree of perceived finance/credit risks associated with them. It would be helpful to understand what can be done for reducing the risk of a credit transaction when approaching a bank or financial companies in Australia. Read this post to understand how enhancement of credit can help large companies to secure necessary funds to commence their projects quickly even if there were initial budgetary shortfalls.

How can credit enhancement strategies help?

Well-planned and executed strategies for credit enhancement can help large companies in Australia to gain market advantages such as negotiated interest rates, higher Loan to Value (LTV), improved interest only period, improved risk pricing of the corporate debt, improved amortisation profile, and longer loan terms. Businesses can get financing using their assets that other lending agency may not accept, with an expert financial team on their side.

What are benefits of credit enhancement for corporate businesses?

Businesses that require additional capital for their project or other expenses often find the strategies to enhance their credit to be the ideal solution. One of the biggest challenges large corporates faces to secure funds is that conventional lenders are unable to consider their assets as collateral for funding. After credit enhancement, lenders are able to accept various assets of large companies in order to secure the working capital that they require. This helps large corporations to get their project off the ground.

When to consider credit enhancement?

Businesses can attain a variety of benefits such as minimising risks while gaining complete access to higher LTV ratios when they partner with an expert financial team in Australia. Such strategies are ideal for property developers, who all too often fall short in pre-sales. Property developers may find themselves connected directly with the required funds via credit enhancement, rather than stalling their commercial projects.

How does credit enhancement for corporates work?

Large companies have to partner with some of the best financial experts, in order to enhance their credit efficiently. After that, the financial expert assesses the unique project and investment potential of the large companies before developing any specific strategies for acquiring the necessary funds.

Based on their experience and knowledge of acquiring necessary funds, the team of financial experts can look at using a variety of assets of the large companies as collateral. Some of the assets that are considered as collateral by the financial expert team are commercial real estate, loan receivables, pooled SME trade accounts, and equipment lease.

Conclusion:

Large companies who require immediate funds must partner with some of the best financial experts, who hold expertise in their area of work, in order to secure necessary capitals or funds. Enhancement of credit can provide the working capital for kick-starting their projects. A successful strategy developed by financial experts will put the capital directly into the account of the large companies or property developers without delay. Funds help companies to commence the work quickly even if there are initial shortfalls of budgets.

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Difference between Commercial & Residential Property Investment in Australia

When we talk about property investment in Australia, most of the Australians think about a residential property investment. Residential property investment may be very popular investment option in Australia but it is not the only one available. Increasing number of Australians are looking at commercial property for investment purposes.

While the fundamentals of investment in commercial property are very similar to those of residential property but still there are some subtle differences between the two types of investment. Here are some of the differences between the commercial property and residential property investments.

  1. Deposit Size:

For getting residential property finance, the deposit size is very small in Australia. When purchasing a commercial property, investors usually need a larger deposit to secure approval for the mortgage.

In most cases a deposit of at least 30% is required for commercial property finance approval. In some cases such as high LVR commercial loans, lenders can offer a maximum loan-to-value ratio of 80%.

  1. Strength of Lease:

Lease period is typically much longer for commercial property. Some of the popular lease periods for commercial property are 5, 10 and 15 years. The lease periods for residential property investment are usually six to 12 months only.

Many Australian investors are typically attracted to commercial property as the long lease arrangements give them greater certainty of rental income.

  1. Goods and Services Tax (GST):

Commercial property can provide greater tax deductions than residential property in Australia, through higher depreciation allowances. It is important to understand that tax advantages are even better when commercial property is bought through property trusts.

  1. Higher yields vs. Capital Gain:

Some investors invest in property for high capital gain and some for a regular income. In most cases you are required to leverage capital gains against higher yields as it difficult to find property that will offer both. While the residential market in Australia performs in a rather predictable fashion in terms of capital gain, this is very less predictable for commercial property.

It is important to consult professional investment consultants, before deciding on a commercial loan or investment in commercial property in general.

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Alternative Finance – What are the possible benefits?

Alternative finance is a fast-growing avenue for small businesses looking for funds. This method of finance offers varied options for funding like crowdfunding, innovative invoice platforms and debt offerings; there is so much choice. In this blog, we have attempted to explore possible benefits of alternative finance. Let’s take a look.

Less approval time

Alternative funding has manifold benefits. First of all, it offers funds in a quick manner. Unlike traditional banks, one need not wait for weeks or months to get one’s application approved because many forms of alternative finance can approve the funds on the same day the application is submitted. This helps small businesses meet their urgent requirement of funds.

Freedom to use the fund

Further, alternative financers do not emphasize on intense scrutiny like banks in regard to asking for a backlog of accounts and figures in order to ascertain suitability; the business owner is held responsible for using their funds as they want rather than being dictated to about how the loan is allocated.

Easy repayment methods

When it comes to banks, steep monthly repayments may prove to be daunting sometimes. But, with alternative finance, this is not an issue to worry about, as a merchant usually advances work by linking borrowed funds to the businesses card payments. Further, payments are made as a percentage of card payments. In this manner, advances are paid back at reasonable rates.

This type of funding allows the borrowers to concentrate on their business without any worry about repayments.

So, if you are looking for a business loan from no pre-sale development finance, preferred equity solutions to property development fund, approach a reputed alterative lender in Australia, who can provide you with unparalleled access to capital, industry-leading experience extensive knowledge and tailored solutions to inflate your project’s profit potential.

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Your Guide To Understanding Mezzanine Debt

What does mezzanine debt stand for?

Mezzanine debt refers to a hybrid debt issue subordinated to another debt issue from the same issuer. It comes with equity instruments that are called warrants. These warrants increase the value of the subordinated debt, thereby allowing flexibility while dealing with bondholders. Mezzanine debt is used by rank new owners ahead of the existing owners in case of bankruptcy during the events of acquisitions and buyouts.

Mezzanine debt is used to bridge the gap between debt and equity financing. However, it is one of the highest-risk forms of debt, is considered one of the highest return providing debts, that usually range from 12% to 20%.

Here are some examples of Mezzanine Debt to give you an insight into the subject.

As mentioned above, mezzanine debt comes with different equity instruments that may include stock call options, rights and warrants. The debt is considered more of a stock than debt because the embedded options make the conversion of the debt into stock impressive.

For example, a private equity firm wants to purchase of company for $50 million, but the lender is able to provide only 50% of the value. In this case, the private equity firm needs to put up the rest of its own capital to meet the requirement. If the company does not want to do so, it can look out for a mezzanine investor to finance 45% of the amount and it will invest only $5 million to buy the company.

When it is used?

Mezzanine debt is generally used to meet capital requirements in mergers and acquisitions (M&A). Further it is used in leveraged buyouts and real estate finance.

If you are looking for mezzanine debt, you should approach an alternative lender to get the best deal.

If we have missed out on any point about Mezzanine Debt, please reply in the comment’s section below.

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