The short-term lender Asset Loans has come up with an unusual solution to its funding problems. It is turning itself into a property developer.The company had funded its lending activities through the issue of $30 million of unsecured notes, with terms of between six and 36 months. Of those, $19 million are current liabilities.The company's financial statement for the six months to December 2007 raises the possibility that it may not be able to refinance its loan book.A note says: "In the event that loans and borrowings are repaid and there is inadequate cash and cash equivalents, the consolidated entity will be required to obtain alternate sources of funding."In the meantime the company has pursued a strategy of focusing on property development activities. Its loan portfolio declined from $17.1 million in June 2007 to $7.3 million in December, partly due to the company acquiring underlying security of default loans "for future development".Shareholders ratified the expansion of the company's business activities to include property development at last year's annual general meeting.The property development portfolio has grown from $6 million in June 2007 to $23 million in December. Developments include 43 units at Hervey Bay, a 150-room motel also in Hervey Bay and 20 townhouses at Calamvale. All are in Queensland.Shareholders will have to cope with some pain during this curious transition. Asset's revenue for the December half was $3.6 million - 46 per cent down on the previous corresponding period. The company lost $2.4 million in the December half. Apart from the reduction in interest and fee revenue, bad debt expenses rose by $1.9 million and borrowing costs were up by $444,000.The company has some assets on the market. The financial statement says: "If the group does not raise sufficient funds there is no certainty as to whether the group may realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report."