Misconceptions of Private Lending

Myths of Private Lending

There are some major misconceptions about private lending that lead some developers and business owners to avoid using them.

For some, private lending has a reputation as being the last resort for desperate borrowers that have been rejected by the major banks. This could not be further from the truth.

For others, it can be perceived as more expensive simply due to higher interest rates. Again, this is a misguided simplification.

Setting the record straight

Private lending is not for desperate borrowers with a poor credit rating. Private lending customers are prudent, successful individuals and businesses that are often presented with valuable opportunities that do not easily fit into the rigid structure of institutional lending. A structure that favours “stable” employees looking to secure a 30-year mortgage, with long-term, serviceable payments that deliver the maximum possible interest payments in the long run.

Banks typically pigeonhole each transaction and applicant based on an inflexible credit policy, and in stark contrast to private lenders, do not evaluate each application on its merits.

For applicants that may be self-employed individuals, businesses without a lengthy track record, or borrowers outside a bank’s obtuse definition of a flawless customer, private lenders are perfectly placed to move quickly and flexibly in structuring transactions for particular purposes.

And there are numerous specific reasons that successful individuals and business owners may wish to obtain finance privately.

For developers, managing cash flow and working capital may be necessary for those looking to complete projects, pay staff, or even sub-divide land for a sub-development project. While for individuals, timing may be critical to secure an ideal property at a bargain price, to avoid losing a deposit where a bank has denied financing, or even in unforeseen personal circumstances, such as a family medical emergency that requires urgent financial assistance.

In addition to serving customers that banks are unable or unwilling to help, private lenders can often be the saviour of lucrative investment opportunities that would not otherwise be possible. In these cases, any short-term, higher interest rates can easily become irrelevant as they are quickly offset by facilitating a successful and highly profitable deal.

Private lenders offer a unique option for astute customers to take advantage of transient opportunities when major banks cannot.

Why UCapital?

The key difference between a private loan and a bank loan is that private loans offer people purpose-driven funds. Furthermore, the choice of a private lender is also completely dependent on your circumstances.

At UCapital, we have a unique team of experts who have the knowledge, expertise, and industry contacts to help our clients find exactly the right financing solution. We help clients devise a clear plan and understand exactly what the loan is required to achieve, whilst taking into account any long-term considerations.

We can source specific products for a client’s circumstances to make seizing market opportunities possible, whilst offering peace-of-mind and maximising value.

22 Jun 2022
By uCAPITAL