Speed, flexibility and streamlined processes – these are just a few of the benefits short-term commercial lenders Aquamore, Mango Credit, Eastwood Securities and Kingsley Finance can provide brokers and their clients.
Long gone are the days when the major banks and a handful of non-bank lenders were the only sources for brokers seeking finance for their clients. Now there are a plethora of options available, particularly in the non-conforming space.
For SMEs, sole traders, developers and even larger companies, having access to short-term finance is necessary to operate successfully in a fast-moving business environment. It’s even more important for those businesses hit hard by the COVID-19 pandemic.
They need fast, flexible solutions, whether it’s access to working capital to assist with cash flow, or they need funds to purchase equipment, buy property, complete construction projects, restructure debt or acquire businesses.
Private lenders Eastwood Securities, Kingsley Finance, Mango Credit and Aquamore specialise in these types of customers – they have the short-term loans that can help brokers meet their clients’ needs.
Australian Broker caught up with the four firms to find out about their products, how they operate and what benefits they provide for brokers looking to diversify.
Sydney-based private lender Mango Credit provides secured bridging loans and short-term business finance.
“Since 2001, Mango Credit has helped thousands of Australians get out of a bind or take advantage of a great opportunity with a bridging loan for personal use, or a business short-term loan for commercial or investment purposes,” says director and founder Yanis Derums.
The company specialises in NCCP-compliant short-term bridging loans, which enable the borrower to draw down equity in their home without disturbing the existing first mortgage.
“This is particularly appealing to borrowers seeking to renovate or prepare their property prior to sale,” Derums says.
He says the lender’s deferred capitalised interest loans have also been well received by businesses throughout the pandemic.
Mango Credit features flexible underwriting, minimal documentation and provides funding within five days of application by way of a caveat (unregistered second mortgage).
For short-term commercial loans, Mango Credit specialises in providing SMEs with quick-access funds ($25,000 to $500,000 plus) for two months to three years.
Derums says common funding uses for these loans include buying stock or equipment, finance for business acquisition, investments or start-ups, or working capital to smooth out cash flow.
Mango Credit also offers short-term personal loans to borrowers who are intending to sell their home and require access to the property’s equity prior to the sale. Common loan purposes include funding renovations; the deposit on a new residential purchase; settlement of a new property while the existing home sells; the payment of personal debts; and small subdivisions.
Derums says Mango Credit is known for its streamlined application, flexible underwriting, and fast delivery of funding, with decisions on loan applications typically made within 24 hours.
During COVID-19, the lender received deferral assistance requests from many personal loan borrowers, which were universally granted.
“Surprisingly, substantially less deferral assistance was sought from commercial borrowers. Both markets have now stabilised.”
For COVID-affected SMEs struggling with cash flow, Mango Credit provides borrowers with the option to capitalise monthly interest payments for up to 12 months, meaning no monthly payments.
“This flexibility provides businesses an enormous cash flow benefit,” Derums says.
He expects the personal lending space to strengthen in the next 12 months as confidence returns to the residential property market.
“Short-term lending supports the market’s current and emerging funding needs,” Derums says.
Brokers are therefore urged to consider the benefits of diversifying into the space.
“Short-term lending fills an immediate and ongoing requirement for personal and business funding. Providing short-term solutions enables brokers to extend their offering, create ‘stickier’ client relationships and add another revenue stream. In particular, private lenders are renowned for their flexible underwriting and speed of delivery, which again assists the broker’s service proposition.”
Derums says Mango Credit has been investing in its broker relationships for more than 20 years and now has a substantial network of brokers.
“New broker relationships are mainly generated through referrals, which is supported through industry engagement.”
“We encourage brokers to become familiar with private lending solutions, which are increasingly filling a market void.”
Founded in 2016, Aquamore is a Sydney-based non-bank lender providing short-term commercial loans, bridging and commercial property loans.
“I have worked with many non-bank lenders, and the main difference for me is that Aquamore has funds ready to be deployed, which gives us quicker turnaround times, clarity on decisions and, crucially, a competitive offering in regard to interest rate,” says Aquamore national sales manager Matthew Porch.
Aquamore has a large target market for non-coded loans, including sole traders, SMEs, property developers and larger corporate firms.
“We have the in-house experience to assess a wide spectrum of facilities and requirements,” Porch says.
The lender’s minimum loan size is $100,000 and the maximum is discretionary, but most loans are up to $5m. Loan terms range from three months to two years, and all facilities are secured by real estate.
“We have funded deals for construction, debt restructure, tax payment plans, property purchases and land banks, as well as business acquisitions and working capital injection for busy trading periods,” Porch says.
“Clients are generally seeking a flexibility that the mainstream lenders are lacking.”
Porch says if the relevant supporting loan documentation is received, the firm can make decisions the same day.
“We are flexible in regard to loan conditions and documentation requirements; for example, if an income verification document is still with the client’s accountant or we are waiting on a valuation report, we can approve the transaction subject to receipt of this information prior to settlement. We often settle deals within a week.”
For SMEs struggling with cash flow, Porch says Aquamore understands the seasonal nature and trading patterns of different sectors.
“Our facilities are interest-only in nature, so the principal is not repayable until expiry of the facility, and we are flexible in regard to purpose of funding.”
Brokers play a crucial, valued role at Aquamore, Porch says.
“We exclusively deal with brokers as we prefer having an intermediary who understands the lending landscape and can explain our product to borrowers.”
Aquamore endeavours to keep the loan process simple through its flat management structure, and all enquiries are managed individually, putting the relationship “at the core of everything we do”.
“A tailored service for our referral partners is key in my opinion to the success we seek to drive and the positive results we have gotten thus far,” says Porch. “Our loan matrix is straightforward, and our goal is clear, so we are able to make quick and effective decisions.”
Having worked in the industry for a number of years, Porch says he has a wide network of brokers.
“We reach out to our new referral partners through simple word of mouth and pounding the pavement to outline our unique offering to the market.”
Aquamore is encouraging brokers to diversify into the short-term commercial finance space and reap the rewards.
“We offer a solutions-based approach, which gives them repeat business from their client. If our loan term is six months for example, chances are the client will utilise the same broker for the exit refinance, which allows the broker to clip the ticket twice. Our business is based on relationships, so if we are familiar with a file and familiar with a referral partner, then it becomes a lot easier,” Porch says.
“Regulated lending is proving harder than ever to traverse, so diversifying into short-term unregulated lending gives the broker another income stream and an ability to widen their opportunity spectrum.”
Porch says the coronavirus pandemic has resulted in “astronomical” growth in the short-term lending market as the banks turn their back on “bread and butter” commercial deals.
“I think the risks have been misunderstood and miscalculated by major lenders who are using a blanket approach of COVID to decline deals and push out approval times. We have seen a large increase in volume as many good businesses struggle with short-term working capital, reduced LVRs and a general drop in confidence in the market.”
Porch believes growth in short-term loans will continue as bank appetites are squeezed by regulatory concerns and COVID uncertainty.
“It’s a very exciting time, and I’m delighted to be part of it.”
Eastwood Securities Mortgage Fund
Adelaide-based private lender Eastwood Securities provides first-mortgage finance to borrowers using real estate as security.
Operations director Peter Schembri says ESMF is managed by a team that takes a flexible approach to reviewing borrower applications.
“We are not constrained by highly structured application processes,” Schembri says. “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.”
ESMF targets business borrowers, including medium-sized enterprises across most industry types seeking “intermediate term” or bridging funding support to achieve specific objectives.
“Geographically, we consider locations Australiawide, including regional and rural property, as security.”
Schembri says there’s no typical loan purpose for borrowers, but 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 of business partners during business separations, and funding of new business opportunities and expansions.
ESMF provides commercial and consumer credit regulated loans secured generally by a 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 loans. Loans are interest-only and range from $100,000 to $5m, with loan terms between six months and three years. Interest can be paid monthly or capitalised into the loan principal.
Simplicity, flexibility and speed are important features of EMSF’s loan process, making things easier for brokers.
“ESMF provides personalised lending services to brokers, including support for those who might require additional assistance in managing private loan scenarios and applications,” Schembri says.
“We can issue indicative letters of offer for finance within 24 hours of receiving an application or scenario briefing. Once the 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.”
The broker network is important at ESMF.
“We operate with a network of finance brokers who focus on the non-conforming lending space,” Schembri says. “Through a targeted approach, our staff make direct contact with brokers at various industry functions, by calling and through our referral network. Over 10 years of operation we’ve found our most valuable referrers have come to us via a lot of personal contact work.”
Schembri is urging brokers who are not operating in the short-term lending space to branch out and diversify. He says the benefits include “attracting new clients and retaining existing clients by providing more and superior client solutions, thereby growing their own business”.
The effects of COVID-19 on short-term lending are evolving, Schembri says, as individuals and businesses come to grips with the new era of living with a disease that “constrains how we live and do business”.
“Private lending has been impacted like most other finance providers mainly in regard to the impact on clients’ needs and the banking sector. After an initial softening of private lending through the first six months of COVID-19, we have seen a significant increase in loan enquiries since the end of October 2020.”
EMSF is helping SMEs that are struggling with a lack of cash flow by providing intermediate-term loans to anybody who has property with significant equity.
“We are also able to provide ‘cash-out’ loans with interest and costs capitalised into the loan principal.”
Schembri is positive about what will occur in the market over the next year.
“We see significant opportunity in our lending space as businesses require more flexible financial solutions delivered in a timely manner to meet rapidly changing market circumstances as we come out of the recent economic downturn.”
Based in Melbourne, Kingsley Finance serves commercial clients across Melbourne, Adelaide and Sydney, offering short-term business, small business, bridging and personal business loans.
Managing director Miles Lackmann says Kingsley Finance differs from other non-bank lenders in a number of ways.
“We run a family office and we’re highly accessible, and brokers tell us that this is important to them,” says Lackmann. “We’ve settled loans Australia-wide, including rural areas. We cater to all loan sizes, and we provide competitive rates.”
Kingsley Finance’s target market is companies and ABN holders. Loan purposes vary and can include construction projects for small to medium developers, debt restructuring, property investment, ATO debts, and business working capital for inventory and other purposes.
Products include first and second mortgage loans and construction and bridging finance.
“Loan sizes range from $20,000 to $20m, secured by mortgages over residential or commercial property in major urban areas. We will also look at lending against rural, agricultural and green-wedge properties.”
Kingsley Finance ensures a simple, streamlined loan application process for brokers and their clients. Lackmann says for loans less than $100,000 a formal valuation is not required, which speeds up the process.
“We don’t have an application form – some of these can be quite daunting for brokers – and we’re happy to discuss a potential deal over the phone or via email.
“We don’t have a one-size-fits-all approach and can be flexible in our assessment of the merits of each deal, so we can provide tailored solutions.”
Depending on the complexity of the proposed transaction, Kingsley Finance can issue a letter of offer within minutes of receiving a loan application from a broker.
Lackmann is also encouraging brokers to branch out into the short-term commercial loan space so they can obtain an additional cash flow stream.
“They don’t have to be experts in the field. We let them know if the deal can be set and provide them with our loan prerequisites.”
Kingsley Finance speaks to brokers with whom it has conducted regular business but also works on attracting new brokers to its network through advertising and cold-calling.
Cash flow problems have affected many SME clients in the last 12 months, Lackmann says.
“Obviously, the impacts of COVID-19 have been severe and far-reaching and have left many businesses struggling for cash flow.
“This also affects their ability to access and service debt from traditional lenders. We’ve been able to help our clients access liquidity from their assets, giving them the funds they need to bounce back without requiring regular interest payments.”
Looking ahead at the next 12 months, Lackmann expects demand for Kingsley Finance products will continue to grow.
“The current environment favours lenders who can help businesses by providing both a non-cumbersome loan application process, and who do not have serviceability requirements as part of their loan prerequisites.”