Lending to property developments generally means waiting until a project is complete before receiving any accrued interest. That’s good news if you’re earning a healthy rate of return and you’re happy to see out the term of a loan. But if your circumstances change and you need access to your capital – and any accrued interest – ahead of schedule, a resale marketplace can help.
At Invest & Fund we operate two marketplaces – a Lending Marketplace where lenders bid to fund new residential bridging and development loans, and our Resale Marketplace. The Resale Marketplace allows lenders who have successfully bid on loans the opportunity to sell all or part of a loan they hold to other lenders.
Why choose a resale market?
Just like property development, lending is not always a straightforward transaction, and a resale marketplace can offer lenders a degree of flexibility if it’s required. A lender may have committed to a loan but might be faced with a change in circumstances, or need access to their capital before the end of the loan term. In this case, lenders can list their loan on a resale marketplace, and if the loan is successfully sold to another lender, access their capital ahead of schedule.
That doesn’t mean a lender has to give up any interest they’ve accrued since acquiring the loan. When a lender sells a loan on the Invest & Fund Resale Marketplace, a new lender chooses to fund all or part of the loan, including any accrued interest. This interest is paid directly to the original lender at the time of the transaction. The new lender also starts to earn interest from the day they acquire the loan, instead of from the day the borrower draws down the loan.
Same superior quality
And just because a loan is listed on a resale marketplace, it’s no indication of a loss of quality. One of our key strengths as a residential property finance specialist is the process we go through to identify and assess potential lending opportunities. We apply the same robust, thorough process to every loan we publish to our marketplace, and we monitor every loan through to completion.
If a lender lists a loan for sale, it isn’t a reflection of the strength or increased risk of the loan – it’s simply the lender deciding they no longer want to hold the loan.
On occasion we might stop a loan going on the Resale Marketplace – if for example a borrower has a poor repayment history and we were working with them to resolve this. In these types of situations, we’d notify lenders who hold that loan and continue to monitor progress.
Listing a loan for resale is a simple process too. Registered lenders have access to all of the loan documentation, independent monitoring and valuation reports for all loans and can thoroughly assess every opportunity on the Resale Marketplace before deciding to lend. If a lender decides to sell, they simply publish their loan to the marketplace via their lending account. Any registered lender interested in the loan can bid and transact easily via our secure platform.
Good news for lenders and borrowers
Peer-to-peer platforms are reliant on strong relationships with individual and institutional lenders who understand the ins and out of property finance and are ready to lend. Naturally, one of the questions new developers and brokers sometimes ask lenders like us is around the certainty of funding. Offering liquidity and flexibility via a resale marketplace helps create an even more diverse group of lenders ready to fund a range of developments.
**This article originally appeared in the October 2017 edition of the NACFB magazine.