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The Role of Private Lenders During the Coronavirus Crisis

Thursday 28, May 2020

Australian businesses have had a rocky start to 2020, to say the least. Businesses still recovering from the impact of the bushfires are now having to face cancelled events, dwindling customers, reduced rental income and supply chain disruptions as a result of the coronavirus outbreak. It's taking a real toll on companies, particularly SMEs.

While there are an array of measures being introduced by the Government to keep businesses going during this period, there are still some companies that aren’t eligible for support or their needs fall outside of the scope of relief packages. Banks are also helping customers with pausing interest repayments and waiving fees, however again, not everyone is eligible.

Private lenders have always had a focus on business lending and supporting small businesses and this is no different during this period of disruption. Particularly, private lenders are able to help those businesses who fall through the cracks. Here is some information about the ways private lenders can support businesses during the Coronavirus crisis.

 

Funds to tide you over

The financial needs of an SME during a crisis are varied but generally it is the necessity for short-term support until things get back to normal. Requirements can include:

  • general cash flow to keep the business operating, paying employees or progress projects
  • purchase of assets or investments
  • funding developments when banks are too slow or put up too many hurdles, such as presales

Because private lenders rely on an ‘exit strategy’ we don’t have to assess the borrower’s serviceability. A short-term fall in cash flow or profitability doesn't impact our assessment of the application.

If the borrower has a genuine business purpose, sufficient equity in a property and a realistic exit strategy then they are likely to be approved for a loan.

 

Loans over $250,000

New business loans backed by the government are currently being made available to businesses affected by coronavirus across Australia. These government-backed business loans under the recently announced Coronavirus SME Guarantee Scheme, are loans of up to $250,000 that are available to eligible Australian SMEs. These loans will all be unsecured with terms of up to three years with no repayments required for six months.

Any businesses looking to borrow over $250,000 won’t be able to access this scheme and will need to seek other finance options. While the banks are still an option, they will likely be inundated with requests from businesses who are eligible for the scheme which means that accessing finance will take longer.

Private lenders can assist borrowers who are looking to borrow more than $250,000 and don’t want to wait the lengthy periods of time that banks take to approve a loan. With interest rates at all-time lows, a short-term private loan is more affordable than ever.

 

Waiting for JobKeeper

The JobKeeper Payment is part of a $130 billion wage subsidy scheme from the government to support businesses significantly affected by the Coronavirus and help keep more Australians in jobs. Almost half the Australian workforce should be eligible to receive the JobKeeper payment of $1,500 (before tax) per fortnight.

However, many businesses are blaming confusing exclusions, uncertainty about which employees will be eligible and the yawning gap between when they must start paying staff and getting reimbursement from the tax office.

Private lenders can help businesses while they await the JobKeeper Payment reimbursement to arrive. A private loan is ideal for short-term loans and can greatly assist keeping the business going and keep paying staff while the government organises the JobKeeper payment.

 

Increased construction costs

Despite a negative outlook on the industry from many analysts, construction in Australia has continued to go ahead and property prices have remained steady. Construction has been one of the few industries able to continue during lockdown periods and is considered a critical part of the economy as Australia recovers from the pandemic. However, rising supply costs are causing issues for developers, particularly as projects come close to completion.

Private lenders are able to assist with completion costs for developers who may have experienced supply cost increases. A short-term loan can enable a developer to complete a project and finalise sales.

 

While the Coronavirus crisis has created less than ideal circumstances for businesses there are ways to keep operations going during these tough times. Private Mortgages Australia has seen an increase in demand for short-term from businesses experiencing difficulties due to Coronavirus and expects this to continue while government restrictions remain in place.

For further information about how we can assist you or your clients then please get in touch with General Manager – Relationships, Shanta Lobo on shanta@privatemortgagesaustralia.com.au or 1300 856 683