In this low interest rate environment, where term deposits are no longer delivering adequate income and there seem to be fewer short-term investment options available, investors are looking for opportunities elsewhere.
From conversations we had with contacts in our network, it appears that many investors have diverted their focus from ongoing cash yields to a reliance on longer-term capital gains to achieve the yield they need. But where can investors go for more immediate yield and income generation?
A few months ago, our team at Merx sat down to consider this exact question. That is what led us to expand our offering with the inclusion of first-mortgage finance through a co-lending model. As we said in the past, this opportunity is open to wholesale investors looking to share the yield and the investment with us. What’s more, investors get first priority on funds advanced, with Merx taking second priority.
We will continue to provide loans to good business owners and property developers. This shift allows us to share the opportunity with others. So, if you know of anyone who may be interested in exploring the investment partnership with us, please get in touch.
In the meantime, here are some recent client success stories.
Client Scenario: This client, an existing business owner and investor, was looking at expanding into a new field by purchasing a business in the health and fitness industry, a gym. The acquisition was complementary to their existing business, although not directly related to it. The client needed additional funds to complete the purchase, but traditional lenders were reluctant to provide the required amount due to reliance on projected cash flow and Covid-19-related risks for the high-contact nature of the business.
Merx Solution: Due to the current uncertainty around cashflow, sectors that are most likely to be impacted by increased Alert levels may find it challenging to secure funding through the banks.
While we take those risks into account, we also like to take a broader view when assessing projected budgets. In this case, we looked at what the business owner had achieved before, and whether their assumptions were reasonable. Following a positive assessment, we granted a $470k loan with security over the new business plus second mortgages over their commercial property and residential property, to be repaid in 12 months.
Client Scenario: This client, active in the hospitality industry, was looking for a working capital facility to support their business growth. Again, due to Covid-19 and the perceived risk around the sector, the banks were reluctant to provide the required funds based on projected cash flow alone.
Merx Solution: Just like the fitness sector, the hospitality industry has been one of the most affected by Covid-19 alert levels, with subsequent uncertainty around cash flow forecasts. In this client’s case, a comprehensive view of their business plans helped us ascertain the quality of their vision and the opportunity for multiple income streams. We therefore provided them with a working capital facility of $150k to underpin their business growth strategy, backed by a second mortgage over their property.