Small Business Finance Funding Options
1. First Tier Lenders:
Meaning an institution with an A.P.R.A license (Australian Prudential Regulation Authority) these are the BANKS and credit unions primarily.
They are governed by BASEL III and BASEL IV which is the worldwide rule book on how a Bank manages its available capital.
The plus side of these institutions is that their traditional cost of funds is typically the lowest and generally with the most restrictive terms.
The problem that is now surfacing is that they are “tapped out” on their allocations to the property sector.
This is demonstrated by their reluctance to fund based on laws of supply and demand and in tighter times like we are experiencing they will typically focus on their existing clients’ funding needs and only choose to fund those that “don’t need an umbrella.”
2. Second Tier Lenders:
Meaning an A.S.I.C regulated lending fund (Australian Securities and Investments Commission). This is typically second most expensive costs of funds. This style of funder is broken down into typically two subtypes.
First being a “pooled mortgage fund” and the next being a contributory mortgage fund.
They sound similar but are vastly different. The pooled mortgage fund operates similarly to it sounds by having a pool of capital that they can lend from.
The technical constraints of this style of the fund are that they have many internal rules in which they need to follow.
3. Third Tier Lenders:
This is the most flexible and also typically the most expensive form of funding. The usual participant is a “sophisticated investor(s)” by definition of the corporations act.
They are usually of the mentality because they understand property they the investor prefer to get involved as the “direct lender.”
They will sometimes have more or less appetite than first and second tiers based on their personal preference and understanding of the underlying deals or transactions that they consider.
The plus is that there is NO rule book or charter other than their prudent approach.
If you have a funding requirement, you can contact us and a specialist will review your transaction in detail and confirm the anticipated terms that we believe we can assist you with.