When the funding dries up

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I continue to see too many instances where funding for a project seizes mid construction.

It is not the first time I’ve seen this. When APRA went through the banks, BDM’s were not able to convert from commercial to construction facilities. The old ‘credit says no’. Funding stopped on projects.

There is currently an abundance of cash for investment. Low term deposit rates from the bank are driving investors to look elsewhere for places for their cash.

This has led to new entrants into the field of residential development lending. They perceive there is a higher return to be made. There has also been an inflow of southern based lenders looking for opportunities in South East Queensland, due to issues in their traditional markets.

I have seen this situation many times. I believe that after more than 25 years in the lending industry I have earnt the right to call these new and inexperienced lenders “puppies”. When the front gate gets opened, many of these young puppies will end up out on the road, getting themselves run over. Others will get scared and hide under the front verandah. Very few, if any, will make it long term in this industry.

When looking for funding, please be careful to choose a funder who will be there for the long term.

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