Invest In Small Business Loans
Why invest in our loans?
Investor funds are tied up for short periods at any given time, giving the investor the freedom to, should circumstances so dictate, use the funds as and where needed (negating the need for costly alternative funding). It also presents the investor with a diminished investment risk profile by virtue of investor funds not being exposed to the negative influences traditionally associated with inevitable economic and/or market downturns for a prolonged period.
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The loans funded by the Fund offer investors a rate of return considerably higher than what certificates of deposit or savings accounts offer (7% p.a. – 12% p.a.). Even in its safest form (lowest yield option), short-term business loans offer returns significantly better than what is typically on offer from a one-year fixed deposit at a bank.
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All loans are backed by collateral, secured by real property, movable assets, and other financial assets that can be used as payment in the event of default.
What loan do we fund?
Business lending involves three parties – the borrower, the investor, and the direct lending company (Thrifty Money) that connects the borrower and the lender.
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Just like a traditional loan, the borrower applies for a loan through Thrifty Money who then determines the desirability and pricing of the loan using various metrics, such as collateral value.
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The loan is then syndicated to a single or a group of investors who provides the capital. These investors receive the rate agreed upon which is funded by the interest rate yielded by the loan.
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One can think of the investors who provide the loan capital as acting as a bank in a way. This structure provides a win-win for everyone involved. Borrowers receive a loan they could not easily or otherwise get. The lenders receive a return on their investment in the form of interest payments.
Interest rates are usually 7-12% which is superior to what they could earn elsewhere.
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Private Business Lending
What is Private Business Lending?
Private Lending occurs when a firm raises money for working capital or capital expenditures by borrowing money taking out a business loan and that loan is funded by is funded by private companies or individuals as apposed to a Bank or large financial institution. In return for lending the money, the private companies and/or individuals is paid the money lent plus interest.
What is Secured Lending?
A secured loan is a loan in which the borrower pledges some asset as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral, and if the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally loaned to the borrower.
Why Small Business Loans?
High Returns
The investors who have invested in Business Loans through Thrifty Money have averaged a 10% return during the period 2015 - 2020 (income distributed was net of our fees and other charges)
Risk
Investors significantly mitigate their risk by lending only to creditworthy borrowers and by investing their capital across as many as 10 loans. (To date not one of our investors have lost their capital)
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Real Diversification
Investors can invest in loans to borrowers from all industries and in doing so they effectively minimise the effect of one or two industries that might be experiencing a downturn. Conversely they also increase the potential to benefit from an industry experiencing rapid growth.
Effective Control
Investors can decide which loans they want to invest in, how much they want to invest and for how long they want to tie their funds up by selecting loans specific to their needs.
Who are our investors?
Our investors are privately-owned organisations and sellect individuals who fund contractual loan arrangements between Thrifty Money and the borrowers. All loan contracts arranged by Thrifty Money are prepared and executed by AG Edwards Solicitors, who are specialists solicitors based in Queensland.
"All Loans Funded Are Secured"
Non-Bank Lending Myths
Myth 1: Private loans are against the law
False - Private loans are legal in Australia, as evidenced by the fact that they account for more than one in four loans according to 2018 research from PricewaterhouseCoopers Australia.
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Private lending activity is also likely to increase due to the uncertain economic times ahead in Australia post COVID-19. That’s because the big banks are already tightening their credit policies and implementing even stricter lending criteria than they already had in place.
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Private loans provide borrowers with more choice in the Australian lending market, as well as providing some ‘non-conforming’ borrowers with their only option of getting finance. A ‘non-conforming’ borrower is one who doesn’t meet the strict lending criteria of a bank or other major financial institution.
Myth 2: Private lenders are dishonest
Wrong - unless you are dealing with an unregulated, uncertified and unlicensed company, in which instance you might be taking an unnecessary risk. Thrifty Money operates under an ASIC governed and issued licence
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All our loans are formally drafted, agreed upon and duly executed in writing.
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Our contract processes are extremely thorough and transparent and designed to protect the rights of all parties.
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All contracts are drafted and executed for and on behalf of Thrifty Money by AG Edwards Solicitors, who are specialists solicitors based in Queensland.
Myth 3: Private loans are only for people with a bad credit history
Not true - while borrowers with an below average credit history are (based on the nature and quality of the collateral offered) considered also, the predominant number of applicants considered have a good credit history.
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The reality is that even well run businesses have a hard time satisfying the strict lending criteria of major banks, often for reasons such as:
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Borrowers who are self-employed and who have a less stable or less secure income.
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First-time property developers who don’t have a track record of successful projects.
Myth 4: Private loans investing is high risk investment
False - Secured private loans significantly lower the investor's risk by providing them with an asset as security.
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1st Mortgages and 2nd Mortgages/Caveat Loans are a common examples of secured loans.
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A caveat loan is a short-term loan secured against a borrower’s existing property. The investor receives a short-term interest in the borrower’s property in exchange for providing the finance.
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This caveat means that the property can’t be used as a security against any other finance while the caveat is in place. It also can’t be sold. This lender’s interest in the property is released once the caveat loan is repaid.
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Second mortgage lenders will normally charge a higher interest rate for a second mortgage (as opposed to a first mortgage) because the lender who provided the first mortgage has priority if the borrower defaults on repayments.
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Second mortgages, equipment and other forms of personal property (such as vehicles you own) can be used as security on a private business loan.