In recent years, private lending has grown from a niche, expensive, and complicated option, into a booming industry. As more private lenders enter the market, the standards continue to improve, and more trusted entities emerge. In light of this, options for borrowers and investors keep going from strength to strength.

By March of 2020, the industry surpassed a whopping $100bn, an increase of $20bn from December 2018, as reported by Simon Cathro. That $100bn is an estimated 9% of all corporate debt – making private lending well and truly a core lending market.private home lenders Melbourne

Last year’s COVID lockdowns and Australia’s subsequent economic recession saw the private lending industry take off even more. In July of 2020, at the height of the pandemic’s uncertainty in Victoria, major Aussie banks were flagging $220bn in loan deferrals and were taking up action to protect their positions by raising additional capital, according to EY Partner and Joint National Head of Capital & De…. With businesses under financial strain and in need of fast solutions to stay solvent, private money lending emerged as a fantastic option for borrowers.

Now, with the economy’s bounce-back quickly surpassing expectations, where does the Private Lending industry sit? What’s the current state of play, and what does it mean for you?

Safe, easy and lucrative

What we’re seeing currently is a positive knock-on effect in the industry. That is, the more players that enter the game (meaning private lenders and private lending brokerages entering the industry) the more the rules of the game (the industry standards), improve.

With that, more people want to get in on the action, meaning, more investors want to get involved. Investors are realizing the industry has changed significantly in a short time. It’s now a safe, easy and lucrative investment option, and it’s an industry that is growing.

People who are wanting to invest their money somewhere other than the stock or property market are now turning to private lending. The returns on investment have jumped, and the investors diversifying their income stream with private lending are seeing an amazing 7 to 8% return per annum. Before, they were sitting at around just 0.25%.

What does this mean for brokers and borrowers?

The long and short of it is – it’s good news!

Because of the interest from investors turning to private lending, and the surge of players in the private money game, we’ll continue to see the trend for better deals grow. And when we say ‘better’, we mean it in a few senses of the word.

Get incredible value from low rates

Rates will continue to drop as upwards of 400 Private Lenders in the domestic market compete for customers. But also, the types of deals on offer and loans that will be considered by lenders will continue to expand in scope, which will absolutely be in the customer’s favour.

Enjoy greater flexibility

Private Lenders once shied away from loan scenarios in regional areas. They also had an obvious preference for Melbourne and Sydney over other Aussie capitals like Perth, Adelaide and Hobart. With the industry’s boom, competition between lenders, and a domestic focus, that has completely changed. There is a noticeable openness to deals far beyond the Eastern Seaboard’s metro hubs.Mortgage Finance Solutions

Know the deal you make will be honoured

These days as a broker or referral partner, when you speak to your clients about private lending or hand them a term sheet from a private lender, you can expect a much easier sell than you would have 5 years ago. That’s due to all the reasons we’ve listed above, but another huge contributing factor is the increase in reliability of a private lending deal.

Nowadays you can rest assured that what you are sold by a Private Lender is what you get. Even the so-called cowboys of the industry are playing by the rules. If they don’t, there are plenty of other Private Lending players on the bench who’ll sub in and nab the client. When competition is this fierce, there’s no room to play dirty.

How can you make the most of the state of play?

If you have a loan coming up for renewal, schedule in time to have a chat with your current Private Lender. Don’t be afraid to ask the question – are you getting the best deal possible?

Go in armed with the knowledge of where the industry is currently placed, and the confidence to ask for the best rate and terms. If your current Private Lender can’t help you, look at what other options are out there. Refinancing a loan can be a great solution if you aren’t happy with what your current Private Lender is offering you upon renewal.

Shop around, and if you need advice or want to talk about refinancing, feel free to get in touch with us