Why aren’t borrowers going to their bank to get a loan?
In most cases, Borrowers are approaching their banks for commercial funding. However, over the past few years the banking regulators have moved to increase the banks requirement to hold significant amounts of capital in reserve. This has created cost of capital issues for the banks which has forced them to constrain lending, especially in the commercial debt sector. Even to existing clients, this has resulted in the banks being unwilling or unable to provide funding for property transactions. Any lending that is offered to clients is often on extremely tight, onerous and uncommercial terms. Banks’ lending to new clients has essentially stopped altogether. This lending constraint with the banks is not one of credit quality or risk appetite. The demand for funding and the credit quality of borrowers is unchanged.
The lending constraints together with borrowers seeking a greater level of customer service has given rise to an opportunity for private funders to provide debt facilities to bank risk level borrowers at private funding pricing.
Does the Fund consider lending to credit impaired borrowers?
No, not in any instance. The Fund only lends to experienced property professionals who have a clean credit history and a track record of successful property transactions.