06.12.2016

Short-term property finance and development funding

Investors and businesses often find themselves in a position where they need money to make money. For example, expanding a business usually requires significant investment in equipment or stock. Equally, if you are renovating or extending a building, you have to pay for this work before the value of the improvements are added to the total value of the property and, therefore, the amount you can borrow against it. Another conundrum for property owners is when they need to funds to buy a new property before their existing one is sold.

Bridging finance is an ideal solution for this type of funding difficulty. It is a short-term loan to tie you over until you’re settled.

At Finance New Zealand we work with a number of specialist property finance funders who offer short term loans. They focus on the value of security and will tolerate a lower level of debt servicing than the big banks.

In the current financial climate, we are seeing that banks have a much lower appetite for development funding. As a result, many deals, that would have once gone through, are now not meeting the banks’ criteria for lending. Here’s where our team can help.

The specialists tend to have a higher interest rate, but as the bridging loan is short term, the interest costs are fairly minor in the scheme of things. A bridging loan is a means to an end, and a very effective one too – it will get to you to a point where you can refinance.

We are seeing more property-based funding here at Finance New Zealand and now have several new partners on our team with property lending expertise. Our capabilities cover owner/occupiers and investors, commercial and residential lending.

Short term property finance can be a solution to assist with other financial issues. For example, a client of ours needed money to fund growth in his business. A combination of this growth and aggressive repayment of his existing debt had resulted him owning money to the IRD. The IRD debt immediately put banks off lending to him even though the business was profitable – just poorly debt structured. However, by using equity in his property, we cleared the IRD debt using a short-term funder, and the banks were then happy to restructure his existing debt and provide funding for future growth.

If you are finding it a challenge to secure property finance, talk to your business partner at Finance New Zealand about short term property finance or development funding.