Maximise the Benefits of Using a Private Lender

Private lenders offer a wealth of benefits for developers (and financial brokers by proxy) — benefits that traditional banks often can’t match.

From early access to funds and flexibility in meeting aggressive timelines to minimising marketing expenses and enhancing return on equity, private lenders provide the financial agility that developers need. Additionally, they offer valuable behind-the-scenes support through industry insights, tailored advice, and project management connections, ensuring projects run smoothly despite unforeseen challenges. For non-developers, private lending can also be a strategic tool to improve credit scores and manage financial health more effectively.
Now that we’ve skimmed over the benefits of partnering with a private lender, let’s explore them in more detail so you can maximise each one.

Benefits that lead to higher profits & lower costs.

Access funds before de-risking.

One of the significant advantages of using a private lender is the ability to access funds earlier in the project timeline, even before substantial risk mitigation efforts, (such as pre-sales) are completed. Traditional banks typically require extensive risk mitigation — often demanding pre-sales to ensure a level of security before releasing funds — which can delay project commencement (need more reasons to avoid the banks? Read our article, For Mortgage Brokers: Why Borrow from Non-Bank Lenders?).

With early access to funds, developers can start their projects sooner, avoiding the costs associated with delays. This means less holding costs and upfront marketing expenses (which are often required to secure pre-sales).

Agility & meeting aggressive timelines.

Private lenders balance flexibility and speed, ensuring due diligence without unnecessarily delaying the loan process. This agility is crucial for developers working under tight deadlines, where delays can be costly and derail timelines.

The ability to meet complex and urgent project requirements is even more critical for larger projects, such as multi-unit developments or intricate land subdivisions, which are inherently more complex. These projects often have stringent planning, construction, and marketing requirements while also demanding greater flexibility. Working with a private lender allows developers to stay on track and meet their timelines, ultimately saving time and reducing costs.

Minimal marketing, maximum returns.

Thanks to fast access to funds, builders can start projects quickly without having to attract buyers during the construction phase. This means potential buyers can see and experience the actual building before making a purchase, rather than relying on mockups and renders. Selling a completed project typically allows developers to achieve higher prices compared to selling units off-plan at lower prices. The finished product is often more attractive to buyers, allowing developers to maximise their returns.

This approach eliminates the need for expensive front-end marketing and display suites, and developers can save substantial amounts — potentially hundreds of thousands of dollars on marketing and display suites. Private lenders are willing to assume this risk for quality sponsors and projects, allowing developers to allocate resources more efficiently and avoid unnecessary expenditures.

More RoE.

While private lenders may be more expensive due to higher interest rates, they typically provide more substantial funding. This means developers can contribute less of their own money and in exchange achieve a better percentage return on their equity. Then, the balance of their equity could be channeled to other opportunities.

By leveraging the increased funding from private lenders, developers can amplify their potential returns and make their equity work harder for them. If you have a good, profitable project, utilising private lender financing allows you to expand your operations and increase your overall profitability.

Benefits that lead to more support behind the scenes.

Industry insights & tailored advice.

Get access to industry insights and tailored advice from private lenders who view projects through the developer’s lens. Unlike banks, which often focus on metrics and hurdles, private lenders take the time to consider the overall project including the people behind it. At Bowery, for example, we take the time to understand you, your project’s purpose, and the project’s particulars — from big picture plans to nitty gritty details.

This relationship-based approach allows private lenders to identify risks and provide recommendations on how to mitigate them, offering developers tailored advice specific to their needs.

Industry connections & project management support.

Things don’t always go according to plan; we get it. That’s why private lenders provide project management support when the project isn’t running as smoothly as it should — something banks typically won’t help with. Private lenders also have a trusted network and can connect you with the right individuals and teams to enhance projects when things go pear-shaped (or better yet, before they do).

Through its due diligence process, Bowery will vet and qualify the nominated consultants. Where necessary, Bowery will connect projects with exceptional and trusted consultants. A seasoned builder or project manager can make a significant difference in a project, giving newer developers peace of mind knowing their project is in good hands.

Commercial flexibility and nimbleness.

Private lenders understand the complexities of project development. They recognise that scope changes, unpredictable challenges, and supply and demand issues can arise. Unlike banks, which often struggle to adapt to these issues, private lenders excel in providing flexibility mid-project. They’re solutions-oriented, but also show genuine empathy and understanding that banks often lack.j

Private lenders offer more time, additional funding, and flexibility to cover unexpected costs when changes occur. This allows developers to be commercially nimble, ensuring projects continue smoothly despite unforeseen challenges.

Potential for a better credit score.

Non-developers, such as business owners, may require private lending as a bridging facility to improve their financial situation. This can include cleaning up their credit, consolidating debts, or managing temporary cash flow issues. Typically, private lenders prepay the interest, resulting in no interest payments for the borrower during the term, which eases their cash flow burden. During this period, the borrower can focus on exiting the loan either via a sale or refinance.

For example, if a property is valued at $5 million and the borrower has $3 million in debts to consolidate, a private lender may provide $3.3 million. The extra $300,000 covers the interest, so the borrower doesn’t need to provide any upfront payment. This arrangement allows for predictable cash flows and a clean credit score at the end of one year, making it an advantageous option for business owners.

Can a traditional bank give you all these benefits?

Private lenders offer significant benefits that lead to higher profits and lower costs for developers by:

• Providing early access to funds, by funding pre-development costs and avoiding delay-related expenses.
• Staying flexible and fast in the loan process, helping developers meet aggressive timelines.
• Minimising marketing expenses.
• Enabling the sale of a finished development (not pre-sale via plans).
• Allowing developers to achieve better returns on equity with less cash investment.

Additionally, private lenders offer valuable support behind the scenes via:

• Industry insights and tailored advice.
• Networking and project management support.
• Adapting to scope changes and unforeseen challenges, ensuring projects progress smoothly.
• Improving credit scores (for business owners) by easing cash flow burdens and facilitating financial consolidation, resulting in a clean credit score after one year.

Set your project on the right path.

Unlock the full potential of your development project.

Partner with Bowery to access unparalleled benefits that traditional banks can’t match. From early funding and flexibility to expert support and improved financial health, we’ve got the practical tools and guidance you need to succeed.

Talk to our directors to experience the benefits for yourself and explore how we can work together.