( MENAFN - GetNews) Private lending provides business borrowers the ability to get capital on less stringent terms, and with less prerequisites than major banks. This means that if a borrower doesn't meet bank criteria, or requires urgent capital, they are able to source funds from a private lender. Typically, these loans are for short to medium term use, and are for business transactions or property development.
Why private lending is rapidly growing in Australia, and why private credit should be part of your portfolio. Private lending covers a wide range of financial products, from mortgage-backed lending, to invoice financing and to asset finance. Basically, anything where a debt instrument can be created against an asset class.
Private lending allows borrowers to save time, take advantage of business opportunities and mitigate the effects of opportunity cost had they not had access to funding. For this convenience and ease of funding, pricing is higher than a traditional bank, as the provider is taking a higher risk. Sometimes borrowers can have a perfect credit history, but the asset class they are seeking a loan against, such as petrol stations or land banks, are not bankable.
Or it could it be just as simple that the bank will take 3 months to approve a loan, but a private lender can have it settled in 8 days. Another example might be where a bank won't lend more money to an existing business customer because they don't meet serviceability requirements and the business.