Direct from Credit: Background Due Diligence, and UCT updates When it comes to private lending it’s rarely a vanilla deal or straight forward scenario. Instead of relying on quantitative income servicing, private lending focuses on a couple of factors such as purpose of funding, exit strategy, strength of security, and borrower/guarantor background. This is when sophisticated mortgage brokers can put their credit hat on, asking qualitative questions, to explore the what, why and when of purpose, exit, security and background. Many however may overlooked the borrower’s background. Which sometimes a thorough background, media check or people check service may come in handy to avoid surprises, of course those checks have to come with consent by borrower or done by borrowers themselves. Being prepared and upfront at the initial stage of an assessment also allows brokers to come out with strategy to mitigate potential risks, to alleviate credit concerns. Background check that identifies credit adverse history is something we can definitely consider as long as there is a valid reason to it. Typical background check could also be due to overseas business operations, change of names, previous litigations, etc. There aren’t necessarily deal killers, in fact a way to pre-empt risks and structure a strategy to help borrowers. Also, with the new rules coming into effect for unfair contractual terms (UCT), it’s time for brokers and lenders to exercise more qualitative due diligence. When it’s not straight forward it’s when a sophisticated broker can add value. We always stress the importance of helping clients navigate traps and pitfalls in the market, and the new changes is a positive move to scale up industry standard, placing more trust into the value of private lending solutions. Reach out to us to explore opportunities scenarios@n1holdings.com.au
