“Who can depart from his pain and loneliness without regret?” (The Prophet, Khalil Gebran)

This pandemic has disrupted every life and every business.  For some, it has brought about a huge amount of anxiety and for others opportunity.  Regardless, there isn’t any business that wont have a long lasting impact by what we are going through.  Some will require new ideas and others will involve access to capital.

The one thing that hasn’t changed, is our commitment to providing tailored solutions that enrich lives and businesses so we look forward to sharing this next and exciting journey with you.

The market is deleveraging, are you?

When last I wrote to you, I urged you to take advantage of the low interest rate environment to repay debt.  This has been the advice BF Money has been giving to clients while credit was accessible, and interest rates at historic lows.  In effect, we were urging our clients to use that opportunity to deleverage.  We have been big advocates of affordable housing, and in particular of boarding houses.  Touch wood, we have not had even one boarding house loan seek hardship assistance, or repayment relief.

Our deleverage strategy did not mean do not apply for credit. Actually it’s quite the opposite.  We were gearing up to increase the loan limit, while repaying the balances off quickly.  We were advising against interest only style repayments.   Money was easier to get, and it was cheap, but it would not last forever so take advantage while the going was good.  I often say, ‘the best time get a loan, is when you don’t need it’

CoVid19 has disrupted capital markets and money is not as easy to get, especially on larger transactions.  Most Bank’s remain open and are active in business and small property lending transactions.  While we believe these conditions are fluid and that the situation will ease, the biggest shift has been:

– A general tightening of LVR’s for development transactions
– Increase in interest rates on non bank transactions over $20m
– Residual stock loans being in short supply
– Very limited appetite for development deals over $30m
– Much longer approval times of property related transactions

We are still having success in placing transactions, but the above segments seem to be the most affected at the moment.  Our view is that credit to these segments will soon start flowing, but risk will be priced higher for the foreseeable future.

There are however some segments of the markets that are still functioning rationally and priced cheaply.  We’ve outlined some of these in this communication.

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