Perhaps you’re a developer who’s found an opportunity that you want to take advantage of. You have the plans in place and believe that your idea could reap massive rewards.
Or maybe you’re a builder or tradie. You have ambitions to grow your business so you can serve more clients and create something truly special.
Either way, you face the same problem – accessing finance.
The unfortunate fact is that tradies, builders, and developers all struggle to access finance from banks.
Why Is Accessing Finance Such An Issue For Tradies & Builders?
While each professional shares the same problem, there are different issues lying behind it for each.
Let’s look at why you might struggle to access finance.
The Challenge For Tradies Securing Finance
The big problem here comes from the fact that most traditional lenders want you to offer security on a loan. Typically, this comes in the form of a property.
Now, let’s imagine that you’re a self-employed electrician. You may not have business premises but you hope to buy one. With your premises in place, you can hire a team so that you can take larger contracts and expand the business.
The problem is that you don’t have a property to use as security.
It’s a catch-22 situation. You need finance to get the property but you need a property to secure the finance.
Most retail banks refuse to provide the money that you need if you can’t offer security. And if you offer up your own home, you’re putting yourself and your family at risk.
The Challenge For Builders Securing Finance
Builders tend to face two different problems.
The first comes from the structure of a progressive drawdown loan. This is one of the most common types of finance that builders can access. With this loan, the customer takes out a construction loan and as you finish each stage of construction such as Slab Down, Frame Up, Roof On, you make a claim to be paid. Until then you have to rely on your own cash flow to pay suppliers until the client’s bank has authorised the payment of the progress claim.
This type of loan can catch you out if you’re relying on the money to make payments to suppliers and subcontractors. If the bank doesn’t approve the drawdown, you’re left with no cash to pay people.
This creates a short-term cash flow issue which could cripple the project if you don’t have finance in place. The bank wants to see you move the project further forward before they’ll release the next portion of the loan. But your suppliers and subcontractors won’t provide what you need to get to that next stage until they get paid.
This can lead to project abandonment, in the worst-case scenario.
The second problem comes from a certain type of project. You may buy a block of land with the intention of building a “spec house” on it. While you can’t sell until completion, this is a good way to keep your subcontractors employed if work slows down. Plus, they get to make some profit on the job.
Unfortunately, traditional lenders see these sorts of jobs as big risks. That means they want you to pre-sell the project before they’ll offer you any money. You don’t want to do that because you know that you’ll usually get a higher price if you sell upon completion.
Again, you can find yourself in a situation that leaves you struggling to find finance.
The Challenge For Developers Securing Finance
The big issue for developers is that most traditional banks don’t finance development from start to finish.
They finance construction.
As a developer, you know that a lot of time, effort, and money goes into the stages that come before construction. You need to do research, conduct feasibility studies, and engage a host of professionals.
You’ve also got to buy the block of land, apply for a development application, and deal with the cost of the approval process.
Unfortunately, many traditional lenders expect you to finance these stages yourself. That can lead to you missing out on prime opportunities.
Beyond this, developers have to deal with the same pre-selling issues that builders have. The bank wants you to pre-sell to give them more security on their loan. Doing that de-risks their investment in you.
But it’s also likely to decrease your profit margin as you’ll make more money if you sell upon completion. When buyers can see and touch the property, they’re more likely to make larger offers.
Again, this conflict between a desire for security and potential future profits makes it hard to get finance.
The end result of these problems is that all three parties face massive frustration.
For the tradies, this inability to attract financing means that they can’t grow their businesses. A small business stays that way because lenders need the security that only a larger business can provide.
You’re not able to take on larger projects because you’re unable to build a team. Plus, it always feels like you’re living on the edge when it comes to cash flow. If you do take on a large project, you’re constantly worried about the costs of labour and materials. And if you’re dealing with longer payment terms, those problems only get worse.
Builders get to watch potential profits slip through their fingers. They can’t take on the “spec house” projects that tide them over in lean months because they don’t have the money to fund them. And much like tradies, you’ll always feel like you’re struggling with cash flow. Progressive drawdown loans mean you’re always working to the edge of your budget before you can access more money.
It doesn’t even seem to matter how long you’ve been in business. You might have a solid 10-year track record and most banks still won’t want to help.
For developers, the biggest frustration comes from lost opportunity. You see more well-funded developers buying parcels of land that you had your eye on. Worse yet, you know they’re going to make a profit from the land that you couldn’t buy because a bank wouldn’t approve finance.
You’d have to take on multiple projects just to make any of this work. Unfortunately, that’s only an option for larger developers that have deep pockets. Smaller developers get stuck in a cycle of having to pre-sell to get access to finance for the project. That limits profits and often makes it impossible for them to handle more than one project at a time.
And if you try to supplement your income with another business or job, the bank sees you as a part-time developer. That makes you even more of a risk, which makes it even harder to access finance.
What’s The Solution?
Stop looking towards traditional lenders for help.
If you broaden your search, you’ll find all sorts of alternatives out there. Here are the ways that Mardent Finance can help you.
Finance For Tradies
We offer several finance options for tradies. These include the following:
Finance For Builders
We offer both short-term and private financing options to builders.
Our short-term finance options allow you to draw down against your turnover even if you have inconsistent cash flow. We provide finance up to $50,000, with some businesses being able to access up to $100,000. Best of all, we don’t need to see all of your financials to approve the finance.
Our private finance option provides you with the capital you need to make purchases without any need for pre-sales. This is ideal if you want to build “spec houses”. We advance the funds based on the end value of the property, rather than just the land and construction costs. That means you get to take full advantage of your asset’s value.
Beyond this, we also offer a facility that helps you to pay suppliers both in Australia and overseas.
Finance For Developers
We offer access to more than 150 non-traditional lenders and private financiers who can help with the following:
The latter proves especially useful if you have a financier already and wish to repay that debt. We can arrange finance to pay you out of the arrangement. And we can do it even if you haven’t made any pre-sales for the development.
For example, you may still have 15 units left to sell out of a stock of 30. With our refinancing option, you get access to the finance you need to sell the units at their full value. Plus, you get more time to make the sales.
It’s time to escape the catch-22s that traditional banks place on you.
With Mardent Finance, you can access alternatives that allow you to achieve your business goals. Whether you’re a tradie, builder, or developer, we have facilities that will help you.
All that’s left to do is apply below to get in touch with our team and start the process or contact us and we’ll get in touch to talk about your financial needs.