Will the money be there?

The lending market has seen an influx of new entrants promising low interest rates and fees.

This is where I sit back and say, “Here we go again”.

While I know where it is all headed, it looks like “sour grapes” or (my favourite) “professional jealously” if I push lines about…

1. loyalty
2. will they still be there at the end of the loan?
3. what is hidden in the loan terms?
4. is it really cheaper?
5. what are their service levels?
6. how will they react if there is a problem etc.

I have seen a lot of competitors come and go over my 25+ years running GPS.

The reality is that in residential development lending anyone can lend money, few can get it all back and even less can lend with consistency.

It is very easy to settle a loan when you only have to come up with the initial advance. Harder to make sure the money is there for progress draws when the time comes.

The lesson most new lenders learn the hard way is that it isn’t just about how much you can lend, but whether you can get it back, and what usage rate you can achieve on your funds.

If you don’t get it back your investor base will desert you, and your business will fail.

If you don’t achieve a good usage rate of your funds, you won’t make any money, and your business will fail.

While southern based lenders will spruik their size and time in business, they may have limited experience in Queensland and a limited attention span.

When it doesn’t work out for them in Queensland, or there are other opportunities closer to home, they will drop the Queensland market like a school bag at 3.00pm.

It is the same as builders. You don’t want a builder to fail halfway through a project. If a builder is too cheap there is an increased prospect that they aren’t making a good enough margin and then won’t complete the build.

I have already received “Richard, old friend and buddy” calls with applications for funding for part completed projects.

GPS stepped in and took over funding for one such project mid last year. Now construction is nearing completion and we are working with the borrower to move on to stage two of the project.

Richard Woodhead| Managing Director