Australian business owners who are seeking alternative financing options are increasingly turning to private lending. An attractive solution for a variety of reasons, private lenders are usually more flexible than traditional lenders and can develop customised loan structures that cater to your business’s unique needs.
But is it too good to be true? If you have concerns about the security and reliability of private lending, here’s what you need to know.
Understanding private lending
Private lending is simply a different way to borrow funds – usually through non-traditional lenders like specialised lending firms or investors. In other words, it’s a way to get the money you need quickly without having to rely on traditional banks and their antiquated procedures.
Private lenders are known for their agility, quick decision-making and willingness to consider borrowers with unique circumstances – particularly small businesses and entrepreneurs. They offer a range of financing solutions, including short-term loans, bridge financing, loans secured by assets or properties, and more.
Just how secure is it?
One of the primary concerns about private lending is how secure the borrower’s (i.e. your) assets and sensitive information are. Business owners need to carefully consider the security structures and identity protection measures put in place by private lenders.
Reputable private lending providers will prioritise your confidentiality and always work to protect your personal information. They typically do this through things like data encryption systems and secure storage protocols, and they will adhere to strict privacy policies that safeguard your personal and financial data.
Collateral and asset protection
If you are considering private lending, know that most borrowers provide collateral or assets to secure the loan. This serves as a safeguard for both the lender and the borrower. In the event of a default, the lender can recover their investment by liquidating what you’ve put up as collateral.
Every Australian business owner – whether you run an established operation or are just starting up – should ensure your private lender has transparent and fair procedures for assessing the value of your collateral, as well as guaranteeing its security and having a framework in place in the event that legal proceedings are required.
Custom loan structures
With flexibility being a big advantage of private lending, business owners need to be careful about how the loan is actually structured. Unlike traditional banks – which will have rigid lending criteria – private lenders can offer more customised loan arrangements to meet your particular needs.
Private lenders will assess your loan application based on a broader range of factors, taking into account your business plan, cash flow projections and growth potential. And while it’s a positive that they can accommodate borrowers with less-than-perfect credit histories and non-traditional business models, you need to make sure you aren’t being taken advantage of.
Quick turnaround time
In the fast-paced world of business, time is money. Private lenders understand this urgency and can give you a quicker loan approval and expedite the funding process compared to traditional banks.
They streamline their operations and decision-making to minimise delays and respond promptly to any borrowing enquiries you might have. This can be especially beneficial for businesses that need capital straight away for time-sensitive opportunities or to cover unexpected expenses.
Risk and interest rates
While private lending is a more flexible and accessible alternative, it’s important to remember that it often comes saddled with higher interest rates compared to traditional bank loans. This is because private lenders assume a higher level of risk when taking on borrowers who don’t meet the stringent criteria set by banks. The higher interest rates reflect this increased risk.
“By partnering with the private lending experts, business owners can access tailored loan structures, benefit from faster processes and leverage their assets,” says Gary Rawlings, Managing Director at Ezi Private Lending. “But as with any major financial decision, it’s important to always conduct your own due diligence and research, and make sure you are happy with the terms of the lending agreement before jumping in.”
Contact Ezi Private Lending online or call 1300 854 033 to find out more about how private lending could be the ideal solution for your ambitions.