It’s been a busy start to 2021 with the team at Merx experiencing strong demand for our first-mortgage finance. In recognition of the demand for fit-for-purpose business finance in the market, we are actively seeking additional investor relationships.
To date, our co-lending model, which gives wholesale investors first-priority on funds advanced with Merx taking second priority, has been well received by investors seeking new opportunities. If you would like more information on our co-lending Investor model, or know of any investors who may be interested in exploring the potential with Merx, I welcome you to get in contact.
In the meantime, read on for our latest client scenarios.
FIRST-MORTGAGE LENDING
Client Scenario: This client, an Auckland-based property developer, needed funds to complete the construction of a two-house subdivision development. However, due to tightening banks’ rules around loan-to-value ratio and pre-sales requirements, raising finance through traditional lending proved to be a lengthy and uncertain process.
As the amount this client required did not qualify for wholesale funding, their bank required proof that they could service the interest each month. Caught in unexpected red tape, the client approached us to get the project off the ground.
Merx Solution: At Merx, we assess projects based on their fundamentals. When it comes to higher-density construction, for example, rather than requiring pre-sales or monthly interest as a condition of the loan, we take into account expected returns and can capitalise the interest to the loan.
Following a positive assessment, we were able to arrange $1.5 million of first-mortgage finance, at 66 per cent LVR, to be repaid in 12 months. This will help the client complete the development, and be in a position to rent or sell to maximise profit.
EQUITY WITHDRAWAL
Client Scenario: This client, a business owner and investor, was looking at withdrawing equity from an existing Auckland residential property to purchase a small wholesale business. Despite the client’s positive business track record, the venture they planned to purchase was entirely new, and the bank was reluctant to provide funding based on projected cash flow alone.
Merx Solution: By taking a broad view of the business’s future growth, we were able to provide initial working capital of $200,000 at 70 per cent loan-to-value ratio, secured by a second mortgage on the property. This structure allows the client to maintain a portion of their debt with the bank at 3 per cent, and the second mortgage with us at 15 per cent, with a weighted average cost of funding sitting low at 6.4 per cent.