Most banks and other mainstream financial institutions have stringent rules and requirements with regards to loan serviceability, borrower experience, tenancy mix and Loan to Value Ratios (LVR), to name but a few.
The minimum requirements would typically be the borrower’s up-to-date financials, proof that the borrower is a seasoned property owner, a strong WALE, Interest Cover Ratio above 1.5 times and a maximum 65% Loan to Value limit.
There are however a substantial number of private lenders and mortgage trusts (typically referred to as Non-Banks) that are less stringent, these Non-Banks will not be as stringent on Interest Cover Ratios, might accept a lower WALE and be comfortable with Higher LVR’s.
Non-Banks are “as a rule” more property focused, as opposed to banks that are more sponsor focused.
Non-Bank Commercial Property Loans Benefits
Most Non-Bank Commercial Property Loans offer options that include some of the following benefits:
LVR’s of up to 75%;
Will consider valuation as opposed to purchase price in most cases for Acquisition Finance;
Will accept lower WALE’s as opposed to the mainstream banks;
Will be flexible on Interest Cover Ratios if the transaction has the ability for the loan to be amortised down (over say 12 months) to a level where the desired Interest Cover Ratios are met.
While it is more expensive, it provides a significantly greater return on equity to the borrower or owner.
Typical Lending Parameters for Non-Bank Commercial Property Loans
Up to $100 million
Up to 75% LVR
Interest Rates from 5.6% p.a.
Typical Contributions for Properties with Non-Bank Commercial Property Loans
Total Development Cost
25% Borrower Equity
75% Non-Bank Finance
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