Semper allowed the LVR to be exceeded, on the condition that the borrower make principal repayments during the term of the loan, to the value of the LVR extension. The borrower was able to service 4% per month, paid quarterly in line with their seasonal income.
Snapshot
| Borrower Rate % | 9.99% |
| LVR % | 74% |
| Loan $ | $4,500,000 |
| State | NSW |
| Property Type | Residential |
flexibility
One of the key benefits of funding from a non-bank lender is a level of flexibility which cannot be obtained from traditional lenders. An example of this is a deferment of interest payments, often referred to erroneously as ‘pre-paid interest’. Interest deferment allows a borrower to keep their cash, so they can spend it where it is better needed in their business, and can be for part or all of the loan term.
However interest deferment eats into the available Loan-to-Value Ratio (LVR) and means less cash up-front for the borrower. This week’s case study shows how Semper was able to breach its maximum LVR conditions when the borrower was able to make a partial regular contribution: less than the monthly interest rate, but enough to reduce Semper’s risk.
scenario
Our client sought quick, low-doc funding to acquire a second property pending conclusion of their annual accounts. There was a small ATO debt outstanding from the previous year which also required clearing.
The client’s business was profitable but had lumpy cash-flows due to seasonal work. The current season had been affected by Covid downturn so they were unable to service. Capitalising all of the interest would have reduced the amount available to the borrower, leaving them unable to complete their purchase. Lending more would exceed Semper’s maximum LVR condition for this property type (70%).
Markets were returning to normal and the client forecast income for the following season. They would be able to make some contributions, but not for 3 more months.
Semper’s structured solution allowed the LVR to be exceeded to 74%, on the condition that the borrower make principal repayments during the term of the loan to the value of the 4% LVR extension. The borrower was able to service the 4% per month, paid quarterly in line with their seasonal income. The loan was quickly approved on this basis, allowing the sale to go through.
After 12 months, the client successfully refinanced to a bank, having seen the resumption of annual income and a surge in sales as markets re-opened.
take away
Interest deferments are not the only form of flexibility offered by Semper:
- Where exit is via sale, Semper can consider higher LVR exposures pending sale where there is certainty of outcome.
- For small businesses seeking a capital stack on P&E or invoice discounting facilities, we can offer a PPSR Lite approach, with limited or subordinated commercial and/or personal guarantees.
Semper offer flexibility, along with speed and certainty – attributes valued by borrowers over all others. Contact us today to find out how we can help.
Commercial lending
Semper is a leading non-bank lender specialising in property-secured loans to businesses in any industry with loan sums from $250K – $30M 1st and 2nd mortgages Australia-wide up to a maximum LVR of 80%.
Semper offers a wide range of flexible products tailored specifically for you. We specialise in all your short-term and bridging finance needs.
We don’t do loans the banks won’t, but assist when the banks can’t, usually due to timing or circumstance.
COMMON LOAN USES
Managing cash-flow challenges, such as:
- Tax liabilities and ATO debt
- Replacement finance or deleverage from an existing lender
- Pre-insolvency issues/ release from administration and turnaround
- Creditor payments
- Release of equity
- Debt refinancing
- Seasonal trends
- Business emergencies
CAPITALISING ON AN UNEXPECTED OPPORTUNITY
- Bridging the gap between sale and purchase (residential or commercial)
- Rapid drawdown and equity release
- Buying a business
- Meeting the capital needs of a growing business
