There are several reasons why you might not want to finance with the major banks including, documentation, high interest rates, or you simply want to avoid the debt trap. A practical alternative might be private lending. It simply involves borrowing money from a non-traditional lender, who is typically a wealthy private person or business looking to increase the return on their spare income from their primary line of business. In recent years non-bank loans have increased 15% year on year, while the market share of the big four banks has declined.
What Is Private Lending?
Loans provided to a person or business by a private institution such as IBN Private or even a wealthy individual are referred to as private money loans or private lending. Borrowers are typically given access to private money without having to meet the traditional eligibility requirements of a bank or other lending institution. The main problem is that private money loans can occasionally carry a high level of risk for both the lender and the borrower. However, through private lending the borrower has more freedom to use the loan for ideal objectives when there is less restriction.
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Is Private Lending Legal?
All private lenders are subject to banking regulations and must abide by federal and state usury laws. However, not all common laws are applicable to private lenders and the loans they provide. Lenders are also occasionally restricted in how many loans they can make if they lack a banking license.
The Pros & Cons Of Private Lending?
Pros:
- Fast turnaround times and simple access mean less paperwork and less stress.
- Private money lenders don’t run background or credit checks; their only concerns are the security property and your exit strategy.
- They are flexible in the type of collateral needed and all have unique operations or standards.
Cons:
- Interest rates cover risk and are therefore around 9–15% annually
- Unlike banks that usually give you years to pay back loans, private lenders expect you to pay back in 6-12 months.
How Do You Get Private Lending?
The majority of private lending services solely make loans for commercial purposes only. For business objectives, one might buy commercial real estate, cash out to help the company’s cash flow, or buy assets through corporate structures. The money cannot be used for private purposes, such as buying a house to live in. An affirmation that the money is to be utilized for business reasons must be signed by you. If you require a loan for business purposes in Queensland, New South Wales or Victoria you can contact IBN Private to get access to funding for your business project.
Uses For Private Lending?
Bridging Finance:
A temporary fix for a certain kind and amount of debt, ranging from $500,000 to $250 million, is bridging financing. These loans are frequently utilized by residential and commercial developers to buy land in highly competitive markets when time is of the essence as they can be approved in a matter of days.
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Tax Debt:
Many companies are in a difficult position as taxes increase and can cause risks of personal liability and further action if not taken care of. Private loan, or funding, is a high-end option for this specific debt that enables businesses to relieve their financial stress and set up their operations to resume regular trading.
Short Term Funding:
Short-term funding solutions provide funding for a specific purpose within a firm for a brief period of time, often 1 to 12 months, and range in size from $250k to $10m to develop finances or take advantage of growth opportunities.
If you’re looking for private lending IBN Private specialises in short-term, secured private lending. Providing borrowers with a quick decision, quick time to settlement and easy application process, guided by our experienced team.