Advantages of Private Funding for Property Development
Property development is a complex and ever-changing industry that requires vision, expertise, and a lot of money. In Australia, the property development industry is constantly evolving and presents many opportunities and challenges.
One of the trends that has emerged over the last few years is the move towards private funding as an alternative to bank funding. This shift is driven by the need for more flexible, faster, and accessible development finance options. It is also a good solution for those who can’t meet traditional banks’ strict criteria.
In September 2023, Australia’s construction industry added approximately 120 billion Australian dollars in value. Funding for these projects is a challenge with many developers struggling due to the conservative lending of traditional banks. That’s where private funding comes in.
Private lending is an advantageous alternative to traditional bank funding. It offers flexibility, transparency, and potentially higher approval rates. Certain private lenders can offer tailored financial products that may suit the needs of property developers.
Maxiron Capital is a subsidiary of the Maxiron Group and has been a part of the Australian financial landscape since 2002. Let’s take a closer look at the advantages of private funding for property development and explore how Maxiron Capital can help you achieve your project.
10 Benefits of Private Funding for Property Development
Private funding has many pros for property developers. In the following sections, we’ll look at ten of them. Let’s discuss how comprehensive funding solutions can provide flexible and efficient financial options to successfully launch and manage development projects.
1. Flexibility in Funding
One of the biggest benefits of private funding is flexibility. Private lenders can tailor loan terms to suit any project. Whether it’s a first, second or third mortgage, bridging loan, equity release, or construction finance for property development projects, private lenders can tailor their products to the project’s timeline, cash flow, and risk profile.
Banks on the other hand offer more rigid loan structures with less room to negotiate. Their eligibility criteria is very strict. They look at credit score, require income proof, and lots of documentation.
Private lenders are more willing to work with borrowers who don’t meet these strict criteria. They offer a more flexible and personal approach to funding.
2. Speed and Efficiency
Traditional bank loans often come with potential delays and risks, making the process complex for property developers and investors.
Time is of the essence in property development. The ability to get funding fast can be the difference between getting a prime piece of land or losing it to a competitor. Private lenders understand this and have streamlined processes in place to potentially approve loans fairly quickly.
Most private lenders may be able to approve and fund loans within a few days, allowing you to act quickly on opportunities. This speed and efficiency is in contrast to banks where loan approval can take weeks or even months. Reduced paperwork, direct communication with decision makers, and a strong focus on project viability means faster approvals so you can keep momentum in your project.
3. Higher Approval Rates
Private lenders are more focused on the project’s viability and potential profitability rather than the borrower’s financial history. This means possible higher approval rates for loans even for developers who don’t have a perfect credit score or extensive financial documentation.
Private lenders also take into account property equity, exit strategies, and market conditions. This view means that they can possibly approve most loans which banks would decline.
4. Lower Opportunity Costs
Opportunity cost is a big concept in property development. Delays in getting funding can mean missed opportunities, increased holding costs, and reduced profit. Banks with their long approval processes impose significant opportunity costs on developers.
Pre-construction costs encompass expenses incurred before actual construction begins such as land acquisition and planning fees.
Most private lenders may help reduce costs by offering faster funding, which could allow developers to start projects sooner. This timely funding means you can start projects sooner, finish them faster, and get to the market sooner without much delay. Reduced opportunity cost is a big advantage of private funding so it’s a must to consider it for developers.
5. Specialised Knowledge
Private lenders often have specialised knowledge and expertise in property development. This means that they can offer valuable guidance and support throughout the funding process. Whether it’s navigating regulatory requirements, understanding market trends, or managing project risk, private lenders like us have the years of experience needed for the task. Our years in the industry is especially useful for new developers or those undertaking complex projects.
6. Customised Repayment Terms
Flexibility in repayment is another advantage of private funding. Private lenders may offer interest only loans, balloon payments, and repayment schedules aligned to specific project milestones.
Identifying the right funding solution is crucial to successfully initiate and support property development projects. This flexibility means developers can manage their cash flow better and align repayments with project income.
A well thought out exit strategy is also required for private funding. Lenders work with developers to create exit strategies that ensure loan repayment, reducing risk for both parties. Private lenders can also help with long term financial planning, offering solutions for refinancing and reinvestment once the project is complete.
7. Lower Costs in the Long Run
While private lenders may charge higher interest rates than banks, the total cost of funding through a private lender can be lower over time. This is due to several reasons such as faster project completion, reduced opportunity costs, and avoidance of hidden fees that come with bank loans.
Banks may also have penalties and mandatory insurance requirements that can add to the total cost of a loan. Private lenders generally offer transparent pricing and terms so developers can manage their budget better and get a better return on investment (ROI).
8. Building Trust with Private Lenders
Trust is the foundation of any financial relationship. Most private lenders focus on transparency and direct communication which builds trust and leads to better partnerships. This level of engagement allows developers to build long-term relationships with their lenders and get better loan terms and ongoing funding.
At Maxiron Capital we build long-term relationships with our clients. By working closely with developers, we get to know their financial needs and deliver tailored solutions and service.
9. Market Flexibility
The property market is volatile and economic conditions can change overnight. This can impact development projects. Private lenders are more versatile than banks. They can potentially adjust loan terms, extend deadlines, or restructure funding agreements. This provides thorough funding solutions for property developers, making them a valuable partner in uncertain times.
During economic downturns or market crises, private lenders can support developers to navigate challenges. This means that projects can keep moving forward even in tough market conditions. Private funding strategies can also future proof projects and make them more resilient to market uncertainty.
10. Services for Niche Markets
Private lenders are best positioned to service niche markets within the property development sector. Whether it’s boutique developments, eco-friendly projects, or high-risk projects, private lenders may create customised financial solutions that banks won’t touch.
For developers with unique or unconventional projects, private lending solutions offer the flexibility and creativity to get funding. This ability to service niche markets is a big advantage of private lenders, making them an essential resource for innovative developers.
Maxiron Capital as a Private Funding Partner
Maxiron Capital is a preferred partner for property developers seeking private funding in Australia. We are a leader in delivering customised financial solutions.
Development finance offers significant advantages in securing funding for development projects, including less stringent eligibility requirements, flexibility in financing options, and a faster approval process, which are critical for developers looking to efficiently manage their cash flow and project timelines.
Experience and Skills
Our 20 years of experience in the financial services industry has given us the knowledge and skills to potentially support projects of all kinds and ambitions. Our understanding of the market and ability to deliver customised financial products makes us a trusted partner for developers across Australia.
Private lending is an advantageous alternative to traditional bank funding in property development, offering flexibility, transparency, and higher approval rates.
Fast Funding
One of the benefits of choosing Maxiron Capital is our fast funding. Unlike other lenders who are intermediaries, we are a direct lender. This means that we can fast track the approval and funding process, often in days. This speed is critical to get projects underway and keep momentum.
Traditional bank loans often come with potential delays and risks. We offer more flexibility and quicker settlement options.
Maxiron Capital’s Settlement Process
Applying for a loan with Maxiron Capital is a simple and streamlined process. We keep it simple and transparent so you can focus on your projects. We aim to make our borrower settlement process quick and easy from application to settlement.
STEP 1 – Request a Quote
Contact our lending team to discuss your situation, get a quote, and submit your application for a thorough evaluation.
STEP 2 – Obtain Approval
Receive the approval letter, review the terms and conditions, and sign the agreement.
STEP 3 – Finalize the Deal
Begin the settlement process, leading to the release of funds.
We know what it’s like to be a property developer. Our ability to potentially deliver flexible, fast and reliable funding has made us a choice for investors and businesses with complex financial needs. With Maxiron Capital, your project is in good hands.
