Development & Construction Finance

RedCap Finance Brokers - Your Home Loans Broker

Are you a developer? Have you found that Getting Finance for your project from the banks is hard to get?

When the world's financial economies went into "melt-down" as a result of the Global Financial Crisis (GFC), one of the hardest sectors to attain finance has been with major construction and development projects. What has become more relevant over the last couple of years is that "the funding sources create the rules, and in order for you to receive funding, you and I have to work within the rules".

Local Banks and Lenders:

Banks and lending institutions within Australia have tightened up their lending policies and guidelines to an extent where their risk is at an absolute minimum when it comes to lending money on major development and construction projects. This can make it very difficult indeed for a developer to get the finance they need to undertake some of these large projects. So what are some of the main factors these banks and lending institutions look for?

1. EXPERIENCE
The lender requires confidence in the developer to be able to cost and efficiently construct the project. Previous experience will be well regarded.

2. EQUITY
Some equity from the developer will be required to start the process. The amount of deposit will be determined on a case by case basis. TDC (as below) may apply and presales may also be a requirement.

3. LOCATION
The location of the development may also become a major factor in determining "Risk" for the Lender. Some areas in each state are not looked upon as "desirable" or "economically viable"

4."TDC"
Traditionally, "Total Development Cost" (TDC) has been the banks and other funders standard method of funding. Basically, this is where the funder would lend a percentage of the TDC up to a maximum of 80% of the development costs.

Non Bank Financiers and Private Funders

GRV development finance method explained

This type of funding is becoming more widely used as the developer may have access to more funds with different lending policies to the Banks. It is not unusual for the interest rate to be higher with this type of funding, however, it does provide a "means to an end". The experience, equity and location factors (as above) still apply here, however, the most common method of funding here is by way of Gross Realisable Value (GRV). This method of finance is based on the end value of the project, on a cost to complete basis.GRV finance is generally less stringent requiring minimum or no presales. The maximum LVR for this type of facility is usually 70% of GRV.

In relation to land settlement, the loan cannot exceed 70% of the value of the land "as is". Should a property be acquired without the relevant DA approvals, and the developer put in place the appropriate DA approvals adding significant value to the land, it may be possible to borrow 100% of the land and development costs. Alternatively, should a developer acquire an approved development site, it would mean that they would need to provide at least a 30% deposit of the "as is" value of the land. Assuming that the borrowings do not exceed 70% of GRV, the entire project would be fully funded from this point.

EZ Finance has many sources of non bank and private funders and by utilizing the GRV method, a property developer is generally able to borrow more money against their project, minimising their equity outlay.

Funding from Overseas...

Our commercial managers are in constant contact with banks and high net worth Investors located in many countries overseas. Our sources in India, China and the US are just starting to release funding for investment in Australia as we are seen to be a safe country in which to invest. Places like China have national laws which only allow their people to own a property for a capped time period, so they are not able to keep the property permanently. Chinese investors see Australia as a good permanent investment option.

“Getting Finance just got easier (hopefully) for YOU!"

VEHICLE & EQUIPMENT LOANS

RedCap Finance Brokers - Your Home Loans Broker

Types of Car Loans

• Car Loans
• Finance (CAR & Truck) Lease
• Commercial Hire Purchase (CHP)
• Chattel Mortgage
• Novated Lease (and Salary Packaging)
• Fully Maintained Novated Lease
• Personal Loan
• Unsecured Loans

Car Loans

A standard Car or Truck loan is the most common type of loan in the market place. The loan is secured against the vehicle for a specified term (normally 5-7 years). The customer will take possession of the vehicle at settlement of the purchase and the financier retains an interest in the vehicle until the entire loan is paid back. Standard terms available with this loan may include

• A choice of variable or fixed loan repayments
• A deposit made up of cash or trade-in may be used
• A balloon Payment ( this is where 10%-30% of the purchase price is payable at the end of the loan term) can be built into the payment structure, effectively lowering the monthly repayment to suit most budgets.

This type of loan is suitable to the person who is looking to purchase a new or near new vehicle and may not have significant business use for the vehicle. (A tax deduction may apply to some fees or repayments if the vehicle is for business use - please seek advice from an accountant on this)

Finance (car or Truck) Lease

A Finance Lease is commonly used to purchase business or commercial vehicles. Whilst the purchaser has 100% use of the vehicle, the financier retains actual ownership. In essence, the financier purchases the vehicle on behalf of the customer, who then Leases the vehicle from the financier and pays a fixed monthly lease payment for the term of the lease. At the end of the lease period, the customer can either pay the residual amount owed (final lump sum payment) and take full ownership of the vehicle or re-finance the residual amount (or trade in the vehicle and start again with a new lease and new vehicle)

Normal structures for Leases include.-

• Fixed monthly Lease payments
• Monthly repayments can be lowered with a lump sum residual
• All costs are known from the start
• Lease payments can be made in advance for tax and cash flow purposes
• GST is claimed by the financier, therefore only the purchase price excluding GST is financed, which in turn, will lower repayments.

Ideally, vehicle leasing is suitable for companies, partnerships, sole traders and individuals whereby the vehicle is used for income producing purposes.

Speak with our RedCap Finance Commercial Advisors for any Business or commercial financing.

“Getting Finance just got easier (hopefully) for YOU!"

* Please speak to your Accountant or Financial advisor before committing to a finance contract