Like a first date, you only have one chance to make a good first impression to secure an approval for your million dollar private loans.
A business lending proposition is assessed on several key components, and private lenders vary in their tolerance for risk.
You need a lender who will share your vision and your energy.
We are all familiar with the “Five C’s of Credit”, the standard criteria upon which the traditional institutions base their lending decisions. Private lending has a distinct strategy and approaches transactions from a different perspective, although the same basic principles apply.
Whilst the debt-to-income ratio, or borrowing capacity, is a major consideration for banks, this factor is not so much a priority for private lenders. While never underestimating the importance of cashflow, we place a greater focus on project feasibility and the exit strategy of the borrower.
So what are the factors that will make Vado Private more likely to approve your private loans?
This is how we assess it – think of it as Vado’s ABC:
We are most interested in the asset itself – the collateral. Whilst the value of the asset is important, we assess other factors such as:
- Highest and best use
- Potential repositioning of the asset
- Planning financial risk and any development upside
- Is the project in alignment with the market?
Benchmarks of the deal:
Be upfront with us if your proposal has been turned down by other private lenders. If the deal has the right ingredients, and is presented persuasively, logically, and with passion, it is likely to pique our interest.
- The story behind the proposal – is it engaging, clearly separating fiction from fact?
- The metrics of the private financing transaction. We look at location, term of the private loans, project feasibility, LVR and the exit strategy.
- Scope. Let’s be honest: size does matter. We don’t tend to think small.
Numbers are run through our financial models, but the final decision is always made by people. Which leads us to our final point.
That’s right, we still do business on a handshake. We won’t deal with someone who lacks the track record and character that we know from experience is vital in making a business or project successful. Our instinct and intuition are intangible qualities that feed into our decision-making process. Often it’s attitude that will get you a handshake as much as the strength of your private lending proposal.