Rodney Adler

CapitalRelated: Venture capital

Short term financing

Non-conforming, second-mortgage lending to companies, direct and without brokers.

Loan size
$300,000–$700,000
Term
3–6 months
Current rates
2–3.5% a month
Borrowers
Companies only

A short-term financier for decades

Literally over the decades I have been a short-term financier. Whilst at FAI Insurances we had an extensive lending book, at Adler Corporation (post the sale of the company) I concentrated on lending and today a considerable part of my business is short-term lending.

Rodney Adler

Lending history

  1. FAI InsurancesAn extensive lending book.
  2. Adler CorporationConcentrated on lending after the sale of the company.
  3. TodayA considerable part of the business is short-term lending.

Non-conforming lending, and his sweet spot

Short-term lending is considered risky but by exercising the proper prudential and internal controls it can be most rewarding, profitable and satisfying. Short-term lending has been described as hard lending, second mortgage lending and — my preferred definition — non-conforming lending. Every short-term lender has their own criteria and their own sweet spot. For me, I lend between $300,000 and $700,000 and for three months to six months. Obviously, I would consider lending smaller amounts of money and larger amounts of money, but it depends on the security, the individual who is borrowing and other pertinent detail.

Rodney Adler

Also known as

  • Hard lending
  • Second mortgage lending
  • Non-conforming lending Preferred term

The sweet spot

$0$300k$700k$1m
03 mo6 mo12 mo

Smaller and larger loans are considered, depending on the security, the borrower and other pertinent detail.

Loan to value ratio

The LVR (loan to value ratio) is the pertinent metric in the equation. Usually a company (please note I only lend to companies) has borrowed on, say, their home — a first mortgage to a senior bank — and that is normally around 60% to 65% of the value of the property. That means the second mortgage lender will lend, say, 20% of the value of the property. Using $100,000 as an example, the first mortgage will be for $60,000 and the second mortgage will be for $20,000; therefore there is a loan to value ratio of 80%, meaning there is still 20% ($20,000 in this case) left of equity in the property based on current valuation.

Rodney Adler

LVR calculator

Loan to value ratio
80%
Equity left in the property
$20,000 20%
Interest each month
$500
Interest over 4 months
$2,000
Broker fee avoided (5%)
$1,000

Loans are typically $300,000–$700,000. Other amounts are considered case by case.

Figures are indicative only and do not constitute an offer of finance.

What he needs from you

All lending comes with a personal guarantee from the borrower and a valuation by a registered valuer. Any other pertinent detail is much appreciated. Questions that are important are what you need the money for and how you will be repaying the money. The history of the borrower and a personal assets and liabilities statement is necessary.

Rodney Adler

What to prepare

  • Personal guaranteeFrom the borrower. All lending comes with one.
  • Registered valuationA valuation by a registered valuer.
  • PurposeWhat you need the money for.
  • ExitHow you will be repaying the money.
  • HistoryThe history of the borrower.
  • Assets and liabilitiesA personal assets and liabilities statement.

What sets the rate

The interest rate of course is directly affected by the economy, the reputation of the borrower, the quality of the assets and the assessment of the likelihood of repayment. Current rates would be between 2% and 3.5% a month. Reasonable documentation is entered into.

Rodney Adler

Rates are influenced by

  • The economy
  • The reputation of the borrower
  • The quality of the assets
  • The likelihood of repayment

Direct, without brokers

Some second mortgage lenders only deal through brokers, but they charge an additional 5% or more. I try not to deal through brokers because I believe that the interest rate charged plus the legal fees is already high and can become unsustainable with another 5% on top.

Many second mortgage lenders advertise; I have not had the need to do that as I am well known in the industry and the greater population as undertaking this activity.

Rodney Adler

Direct or through a broker: $20,000 over 4 months

Direct$2,000
Through a broker$3,000

Interest and broker fee only, excluding legal fees.

Arrange an appointment

Appointments are arranged through the office.

+61 2 8273 8500