What loan renewals can actually mean about borrowers

We’re experiencing an increased period of loan renewals, with about two thirds of our loans at SCP hitting renewals.

So firstly, what is a renewal? Every loan comes with an estimate maturity date. This is a date that investors can anticipate the loan will be repaid on. But for a number of reasons loans can surpass their maturity date, meaning they need to be renewed for another period.

Renewals are a normal part of the loan process
Just because a loan hits renewal doesn’t mean it’s a bad loan.

Looking at construction loans, we see there are many factors that can impact the maturity date of a construction loan. But currently, the most frequent reason is Council delays due to regional lockdowns over the loan period. This is particularly true for Auckland and Christchurch Councils, and currently most of our construction loans are in Auckland.

We have a number of loans waiting for Council-issued Code of Compliance and Title documents, and this is pushing our loans into renewal. In this case, it’s no reflection on the borrower that their loan needs to be renewed.

There are many other external factors that impact both our construction and residential loans, but that doesn’t mean there are issues with the borrower or their loan.

Loan maturity dates are only an estimate
While all loans at SCP have an estimated maturity date attached, that doesn’t always mean funds will automatically be repaid on that date.

However, rest assured that all loans, and all investments linked with those loans, remain valid and continue to earn interest until the loan is repaid in full. This is regardless of maturity date and whether it’s renewed.

Thorough due diligence
You may also notice that renewals can take some time to come through. We adhere to a detailed due diligence process, which involves gathering and assessing updated information from the borrower.

There are no shortcuts when it comes to due diligence. This is why it may take time between a maturity date passing and a renewal notice being issued.

Every investor always has the option to exit their loan via our Secondary Market programme. This is where we on-sell your investment on your behalf to another investor.

If you’d like to discuss your investment parameters or have further questions about the current loan renewal landscape, feel free to email us on investments@scpartners.co.nz.