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Property Development Finance – Good Customer Outcome

Good Customer Outcome - Property Development Finance

A partner of an established Professional Services firm was seeking property development finance for a small three-townhouse unit project.

The Challenge - Property Development Finance

Property Development Finance - Good Customer Outcome
Property development finance is generally not favoured by many Lenders due to:

  • The many variables & risks involved
  • Concerns around the builder capability and their financial capacity
  • No pre-sales being held to confirm market acceptance of the project
  • Uncertainty regarding the projected value and profitability of the development at completion
  • Income from rental on projects not taken into consideration for debt servicing purposes, until the project is fully completed

Even experienced developers, are finding access to such finance increasingly difficult.

The Client Dilemma

Even though our client intended to retain the properties as part of their longer-term wealth creation strategy, the existing Bank declined support due to concerns around debt servicing.

This being despite the fact the client was a partner in an established & profitable firm.

Another Lender indicated a preparedness to provide the requested property development finance, however required the firm and it’s partners to refinance to them.

This step was not palatable to our client due to the potential disruption this would involve for the firm.

The Solution & Outcome

Good Customer Outcome Finance

As a starting point, we undertook a full review of both the professional services firm and our client’s townhouse development project.

Through this, we were able to demonstrate the capacity of the partner to service the proposed property development finance on a “build to hold” basis.

We then approached another Lender.

Outcome Achieved

Leasing Business Equipment - Know Where You Stand With Our Bankability Assessment
Whilst the new Lender would have ideally liked to acquire the total firm relationship, they took a longer-term view, and:

  • Provided the property development finance our client was seeking
  • Refinanced the client’s other borrowings at highly competitive rates

Not only was the client need satisfied, but due to our involvement, the firm’s existing Bank reduced the interest-rate for the firm, from 5.5% to 3.07%, in order to protect the relationship.

Summary

This is a great example as to the benefit of undertaking a full review before approaching the market.

To do otherwise, invariably leads to less-than-ideal outcomes, causing a lot of frustration and delays.

This is why we developed, & advocate for, our Loan and Bankability process.

If you’re looking for finance and would like to learn more, don’t hesitate to give me a call.

Greg Pierlort - Commercial Finance

Greg Pierlot

Greg Pierlort - Commercial Finance

Greg Pierlot

With a background in banking and finance of over 30 years, Greg Pierlot has worked with many business owners and through different economic cycles.

He understands the importance of structuring Finance Proposals to not only satisfy immediate needs, but also constantly changing business conditions.

Greg Pierlot is a credit representative (441033) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237)

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