How to Spot a Good Private Lender for Your Business

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Key Takeaways of Spotting a Good Private Lender

Key Points Description
The Ins and Outs of Private Lending
Private lending involves loans from non-institutional lenders, presenting an alternative to the traditional banking system.
When to Consider a Private Lender
Private lending can be a strategic choice for businesses when they need quick funding or fail to meet banks’ eligibility requirements.
What You Should Look for in a Private Lender
A good lender provides transparency, fair interest rates, speedy transactions and a demonstrated history of settling the loan size you’re seeking.
Beware of These Red Flags
Apart from looking for the features of a reputable lender, be sure to watch out for red flags to avoid getting unfair loan terms.

The Ins and Outs of Private Lending

Private lending involves loans from non-institutional lenders, these could be wealthy investors, family offices, super funds or a combination of these. These lenders offer private loans for businesses, presenting an alternative to the traditional banking system. As mentioned, they can be more flexible than banks and other mainstream financial institutions. For one, they don’t care about your credit history. So, if you can’t acquire business loans from banks due to poor credit, you can rely on private lenders for funding. Also, there are no restrictions; you can use private loans for any business expense or venture.

Private lending almost always involves security; you can use business assets or properties as security to back your loan application. Unsecured private business loans can also be accessible, if you can demonstrate the cash flow required to service the loan.

When to Consider a Private Lender

Private lending for business is a strategic choice, especially in the following scenarios:

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What You Should Look for in a Private Lender

It’s important to understand that Private Lending is an unregulated form of lending and there is significant variation in the quality of lenders. Here are some of the attributes of a reputable lender:

Beware of These Red Flags

Want to spot a good private lender effectively? Apart from looking for the features of a reputable lender mentioned above, be sure to watch out for these red flags:

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Ridiculously Low Rates

Extremely low rates can be a trap. Is the interest rate significantly below the market average? Proceed with caution. Some Private Lenders have a behaviour of charging an ‘assessment fee’ or a ‘due diligence’ fee of many thousands of dollars even though they no intention of providing a loan.

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Too-Good-to-Be-True Offers

Most reputable private lenders maintain a loan-to-value ratio (LVR) below 70 or 80%. So, be wary of lenders offering a 100% LVR.

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Large Upfront Fees

Some lenders may offer low rates or high LVR but with substantial upfront fees. Scrutinise these fees to avoid overpaying.

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Unreasonable Cancellation Fees

High cancellation fees can be a red flag. It’s important to understand the implications of withdrawing from the loan agreement.

Get a Free Loan Quote Today

Ready to explore the possibilities that private lending can offer your business? Dark Horse Financial is here to guide you through every step of the process. With our expertise and commitment to personalised service, we’ll help you find the private lending solution that perfectly aligns with your business’s unique needs. Contact us today or get a FREE loan quote to learn more about your loan options.

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