If you need a plumber on the weekend, who do you call? Well,
a plumber who works on the weekend. Dah!
Do they cost more? Well, that depends. If you wait and the
pipes burst, then no it would have been infinitely more cost effective to have
acted quickly. That is called "opportunity cost".
Little Rock is a Mortgage Manager for private investors who
make first mortgage loans (we may also "blend" that mortgage, using
senior and junior debt to achieve a higher LVR - please call and ask us about
that). We refer to it as transition finance.
Many of our borrowers are highly regarded by the major
financial institutions. For us to be of genuine service to them, they may lack two elements required by
the Tier 1 and 2 financial institutions, and have too much of another element -
1. Time
We allow borrowers to take advantage of a situation that may
present itself and requires timely attention.
2. Process -
Standard application criteria, such as financial statements,
BAS or other matters which may slow down the process
3. Exposure to your existing financier - and that can also be
in context the fact that a borrower may be in technical default resulting from
maturity. What is the ultimate cost of maintaining a good relationship with
your long term financier who wants you to move to quickly to sell security
properties, potentially at a significant discount simply to finalise an
existing facility?
Are we "hard financiers"? No. Firstly, we would
describe hard financiers as lenders who prefer to be in and out of a deal
within 90 days, and who charge between 2% and 5% per month. Do they have a place? Of course they do, or they
wouldn't exist. They are often able to settle within (say) 48 hours. It is a
misconception that such financiers prefer to stay in a loan longer than the
maturity date to charge default rates and costs. It is our experience that they
are acutely aware that at the sorts of interest rates they charge, equity will
diminish at an alarming rate for all. Having served their purpose, they want
out, to re-use the funds, and, putting bluntly, earn more fees.
We have referrals that come from these sorts of lenders
wanting us to "transition" the borrower/security into a bankable
proposition.
So, Little Rock operates at the lower pricing of the genuine
private market. We say "genuine", as there are many pretenders, both
in terms of direct access to legitimate
private funds, or
institutions who, while they may purport to be private lenders are simply that
- institutions, with systems and processes that attach. Do we try to compete
with these institutions? No. Do we have referrals from brokers? Of course. Most
of our business comes from them. However, only with professional brokers who do
not purport to have direct association with our lending clients. The quality of
their input defines our reaction time.
For Little Rock, each case is a blank canvass. So what is
our pricing? Well, that depends on the canvass - location, loan amount,
gearing, urgency, which of our lending clients has funds available and an appetite
for a particular transaction. So it is difficult to be specific until we
understand that proposal. Saying that, our interest rates generally commence at
about 10%pa at the moment, with the majority of transactions being settled in
the 11%pa to 13%pa range.
In exceptional circumstances, we will consider a loan to
valuation ratio of 75% (on a blended rate basis). Speaking of gearing, it is
unusual (but not un-heard of) for us to obtain a formal valuation. If one is
provided, we appreciate it, however our due diligence relies heavily on our own
research.
Loan terms range from 6 to 12 months. If necessary, we will
assist in preparation of the transition to bankable status.
Preferred maximum loan per security property is $2.00M,
however, either for an exceptional proposal, and/or where there may be multiple
securities (even in the same unit block, for instance), we can consider
substantially larger sums. In what market space do we prefer to loan - $0.40M
to $1.50M for a single security property.
Those of you who know us, also know that we will decline a
transaction in an initial telephone call if we genuinely don't expect to have
success based on what we have been told. Approval may take a little longer,
though if you provide us with sufficient information, we will have an indication within hours.
Will we consider smaller land development and construction
loans? Reluctantly, yes, but honestly, we do not specialise in them and they
need to be simple and very well located.
So, can we fix your
plumbing on the weekend? No.
