The “rise” of the non-bank lender

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Recent media has been claiming that with the pullback by the banks from residential development lending the non-banks, such as GPS, will rise, fill the funding hole and cause a property bubble.

The reality is that most non-bank lenders do not have (nor do we want to have) the funding and resources necessary to take over from the banks. The non-banks who try to expand quickly will have to go through considerable resourcing pain, which will prejudice their services levels.

GPS has built a solid investor and borrower base. We are happy with the size of our business and are only looking for what we term “organic growth”, which we can service by improved technology.

Having operated as a non-bank lender for over 20-plus years, GPS does not need to raise new monies for loans. Our loans are primarily funded from repayments of other loans we have written.

Getting the right scale of operations to be able to manage a rolling funding cashflow is a very important factor behind the longevity and success of GPS.

In the current market I have settled on running around 36 loans at any one point in time. This provides sufficient depth to handle the peaks and troughs in our funding cashflow.

The size and types of loans in the GPS pipeline is very important in managing our funding cashflow. We currently have an oversupply of loans in the $6 – $15 million loan size range. There is not much room to move in interest and fees.

GPS does have a current appetite for loans in the $3 – $6 million loan size and we are prepared to “sharpen the pencil” for the right deals with interest rates sub 10%.

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