Why would borrower choose to pay higher rates to borrow from CPF?


Why would a borrower pay a higher interest rate to borrow from CPF?

Sometimes we get asked why would a borrower pay a higher interest rate to borrow from CPF when they can get a lower rate of interest from a bank?

As explained below, the main reason our customers borrow from us is because they can generate more profit when they borrow from CPF.

Typically, our borrowers are experienced property developers with a strong track record who enjoy fully integrated skill sets within their business.

By this we mean they have in house origination skills, project management skills, and project marketing skills, amongst others.

So why would these good quality borrowers use CPF when our interest rates are typically higher than a bank?

CPF’s Flexible lending enables more profits

The main reason our customers borrow from us is because our funding enables them to generate more profit.

Like any business, if a developer’s business is not doing its business (i.e., completing development projects), then they are not making profits.

Our flexible lending parameters mean that a developer can generally start and complete a project in less time than if they tried to complete the development using bank funding.

This means they can finish projects or stages more quickly and enjoy the development profits from their completed development projects.   As opposed to waiting an inordinate amount of time until a project satisfies a bank’s lending criteria.

High Pre-Sales can reduce gross revenue

Usually, traditional bank lending will require a high level of pre-sales. Pre-sales are where the developer is required to sell the end-product before they commence the construction phase of the development. An example of this is apartments sold off the plan.

In order to achieve the required pre-sales required by a traditional bank lender, the developer may have to offer the end product at a discount to its market value.
Often, we find the developer is able to achieves a higher price for their end-product once the development project has been completed and construction is finished.

Allowing the developer to commence their project with a lower level of pre-sales when compared to a traditional bank, may increase the profit available to the developer.

Fiance costs are generally only 8-10% of the overall project costs

For most property development finance costs are generally between 8-10% of the overall project and paying more for finance may not have a material impact on the overall costings on a property development project.

Customer focused lending allows developers to be developers

Often, borrowing from a bank, will take an inordinate amount of time.

By borrowing from CPF, our clients can focus on doing what they are best at and in the end, this results in less stress, higher productivity, and a more successful business outcome.


We are not saying our loans are risk free, however we hope this article clarified that our borrowers are typically astute business owners focused on development outcomes.

Disclaimer Information contained within this document does not constitute financial advice, nor is it a personal recommendation. Capital Property Funds is not authorised or qualified to provide financial advice or to make an investment recommendation.

Information contained within this document is general in nature and has been prepared without regard to the individual objectives, financial situation, or requirements of any person.

This document is not an offer to invest.  Applications can only be made by completing an application form attached to the relevant fund offer documents.

Prospective investors should seek personal financial and legal advice before deciding to invest.

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