Why are non-bank lenders so popular?
The pull-back of traditional lenders post the GFC, coupled with tighter lending standards for banks imposed by APRA, meant some real estate borrowers were left short. Seeing an opportunity to fill the gap, non-bank lenders have emerged to fill the void.
Same, same but different
Non-bank lenders are much like banks in that they’re both financial institutions that provide loans. But that’s about where the similarities end. Banks are built to service the mainstream borrower. Their systems and processes are designed to process transactions in bulk, based on fairly rigid qualification criteria. Loans that fall outside this tight range generally won’t be funded by the banks. This is where the opportunity for non-bank lenders lies.
The rise of the non-bank lender
Non-bank lenders have carved out a growing share of the market by offering value in areas that are important to borrowers, but where the banks get stuck. Looking for a faster response? Need to speak to a decision-maker? Want a customised solution? Need a shorter-term loan? In all these cases, a non-bank lender can offer value and a customer-centric solution. These are some of the factors that borrowers value, that draws them towards non-bank lenders:
- Speed Borrowers need fast access to funds so they can take advantage of an opportunity as it arises. Non-bank lenders can generally provide loans quicker and with more flexibly than traditional banks.
- Flexibility: Borrowers can customise the loan to their requirements based on the purpose of the loan and underlying real estate asset.
- Access the decision makers: Non-bank lenders are smaller and more nimble than large banks. Borrowers generally deal directly with management who are the key decision-makers on funding.
- Simple paperwork: The paperwork is commercially focused, and so much simpler than applying for a traditional bank loan.
- Assessment criteria: Non-banks have their own methods for evaluating customers and are more flexible in assessing deals.
Is private real estate debt right for you?
If you’re a wholesale investor looking for exposure to 1st mortgage-backed real estate opportunities, AltX’s platform provides direct access on a ‘deal-by-deal’ basis. To learn more about real estate debt and how to unlock alternative investment opportunities with AltX, visit www.altx.com.au/investments
Level 21, 10 Grafton Street
Bondi Junction, NSW, 2022
Phone: 1300 991 380
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