Developments and Subdivisions
For very large projects we can arrange funding through a finance company.
Finance companies occupy the space which trading banks see as too risky.
They enable projects, both large and small, to go ahead and develop to a stage where the trading banks can see merit in taking the deal over.
Finance companies provide a great alternative to more conventional funding lines.
- They are short-term funders – generally 6 months to 2 years maximum.
- They have higher interest rates and fees as they know they have a limited time frame to earn from a deal.
- They often rely on a “take-out” to help approve a deal i.e. where there is a defined end-point to a project such as a sale of a property or a refinance by a bank.
- With a take-out in place there is often much less emphasis on proving income if the equity in the project is sufficient.
- There is the ability to capitalise interest and fees through the project so the costs are all contained within the debt.
- They work well for “Property Traders” where they are happy for people to turn-over properties regularly for a profit when the banks are not designed to do this.
- They can help “cleanse” a deal where there could be some credit issues or payment problems which mean a bank is unwilling to take a client on. After 6 months of proven payments with a finance company it is often a lot easier to refinance back into a mainstream bank.
Given a lot of negative press around investing in finance companies, many people are still not willing to deposit their funds with them - but they should never be counted out when it comes to borrowing from them for specific projects.