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Bank Funding Vs Private Lending - The Basics



When to use private lending

One of the largest misconceptions in the market is that private lending is only used when you can't go to a bank and this couldn't be further from the truth. Yes there are clients that use private lending that can't go to a bank but there are also a large number of clients that will use private lending to complement their Bank funding.

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Failures of bank funding

Often Bank funding falls short in terms of being able to provide funds quickly, they fall short in terms of short to medium-term funding solutions and they also fall short in terms of enabling developers to build quickly due to the high debt coverage ratios that they require.

What this fundamentally means is that borrowers should be looking to use
private lending in instances where a bank can't meet their requirements and they should use the two to complement one another we often say that private lending is great for short to medium-term debt and Bank lending is preferable for long-term holding debt.

Property development and funding

and the other thing is especially for property developers is that bank funding is suitable for certain projects and private funding is suitable for other projects so really it's about marrying up the right solution with the right project but more importantly it's about looking at projects and saying is this a project that I'm going to hold on to and retain the asset or is this a project that I want to get in and out of quickly and this will add to the decision Matrix and the consideration factors that need to be looked into when determining which funding source to use

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