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Why will a Factor say “YES” when the Bank says “NO?”

PRIVATE LENDER

THE OFFICIAL EZINE OF AAPL July/August 2015

MICRO-MANAGERS BEHAVIOR

 EXPLAINED

Regulation A+

Abhi’s

REAL DEAL TALK

Approved by the SEC

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MATT FERRIGNO

A simple tool to analyze your growth strategies

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Lender Limelight

PRIVATE ONLINE LENDING // THE NEW ALTERNATIVE ASSET OF CHOICE


Private Lender July/August2015

CONTENTS 4

Private Lender Contributors

6

Lender Limelight Matt Ferrigno

10

Where does Business Go When the Bank Says “No?” By: Mike Ponomarew

12

What’s Current News & Updates from AAPL Members and Partners

14

Measuring Your Private Money Lending Business with a SWOT Analysis By: Corey Curwick Duttonl

18

Abhi’s Real Deal Talk Investor Perspective: 1693 Hosea L. Williams Dr.

24

UPDATE: “Regulation A+” Approved by the SEC By Kevin Kim

26 Private Online Lending: The New Alternative Asset of Choice By Kevin Shane 30 People Don’t Leave Bad Companies, They Leave Bad Managers By Linda Hyde 31

TREND ALERT: Social Media Influencer Marketing By: Chrissey Breault


•••CORNER OFFICE•••

Matt Benson, Executive Director

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e see headlines about “Why hiring millennial could be good for business” almost every day. According to the 2014 Annual Deloitte Millennial (Generation Y) Survey, millennials are expected to become 75% of the global workforce in the next decade. If you don’t begin to understand and adapt to newer generations, like RCN Capital has with Matt Ferrigno, then your business could be in a very difficult spot in a few years. Millennials are digitally literate and constantly connected so you and your company must be too - but genuinely. You can’t just be pushing out messages. An authentic, two-way connection is necessary. We talk a little about the trend in social influencers this edition being actively engaged online is not just necessary for the growth of your company but also enhances your overall career.

Change is inevitable and necessary for growth - we are going through some changes here at the American Association of Private Lenders that we hope will enhance your experience with us and the organizations within our family of companies at Affinity Enterprise Group. As we shake things up we are open to it bringing new ideas and opportunities as well as the chance to shine to our members and as a leader in the company.

PRIVATE LENDER July/August 2015 Production Manager/ Chrissey Breault CEO Michael Wrenn Art & Design Executive Director/ Matt Benson Advertising and Sales Linda Hyde Editor-in-Chief David Lang Private Lender is published semi-bi-monthly by the American Association of Private Lenders (AAPL). AAPL is not responsible for facts or opinions as presented by authors and advertisers. For Subscriptions: Visit www.facebook.com/aaplonline or email PrivateLender@aaplonline.com. For Back Issues: Visit www.issuu.com/aapl, email PrivateLender@aaplonline.com, or call 913-888-1250. For Article Reprints or Permission to use Private Lender content including text, photos, illustrations, logos, and video: E-mail PrivateLender@aaplonline.com or call 913-888-1250. Use of Private Lender content without the express permission of the American Association of Private Lenders is expressly prohibited. Copyright © 2015 American Association of Private Lenders. All rights reserved.

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PRIVATE LENDER CONTRIBUTORS •••••MEET A FEW OF THE TALENTED INDIVIDUALS WHO HELPED BRING THIS ISSUE TO LIFE.••••• CHRISSEY BREAULT A Pittsburgh native and Hospitality major; Chrissey started a part-time photography and design business in 2009, while working full-time in local government communications. She is currently the Director of Marketing and Education Services with the American Association of Private Lenders. Follow Chrissey @CBExpressions or join her on LInkedIn. Beware: She takes too many pictures of her dog and does not have a filter! COREY CURWICK DUTTON Corey Curwick Dutton is a private money lender and Founder of Private Money Utah. Corey is from Austin, Texas and is an MBA Graduate of the prestigious Thunderbird School of International Management. In her spare time, Mrs. Dutton enjoys skiing and mountain biking in the beautiful Utah outdoors.

ABHI GOLHAR Abhi Golhar is Managing Partner at Summit & Crowne Partners, an Atlanta-based real estate investment firm. Since 2003, Abhi has utilized a “value-added” approach to capitalize on real estate renovation, new construction, and development opportunities in the Midwest and Southeast United States. He actively educates and works with seasoned debt and equity investors to employ market-driven investment strategies that yield success. Abhi holds a BS in Electrical Engineering from the University of Michigan. You may find him tweeting @AbhiGolhar, delivering massive value to investors at #RealEstateDealTalk, sending a market trends newsletter at abhi@summitandcrowne.com, or connecting on LinkedIn.

LINDA HYDE Linda Hyde is Director of Operations & Membership Services at the American Association of Private Lenders, an association built on the principles of Ethics and Education. A Kansas City Native; Linda has more than 15 years of customer service experience with 11 years being managerial. While you will not find her on Twitter you can find her on LinkedIn networking with other professionals in the Real Estate industry.

KEVIN KIM Kevin Kim is an experienced corporate and securities law attorney with the Geraci Law Firm, a law firm dedicated to providing reliable and innovative legal solutions. Mr. Kim has an extensive background in complex corporate transactions, private placement, and cross border transactions. He has worked with major multi-national corporations, advising them on matters such as structuring strategic business acquisitions and private equity financing. Currently, Mr. Kim focuses his practice on real estate matters, specializing in private placements and other alternative investments for private lenders, real estate developers and other real estate entrepreneurs. His work includes ensuring clients are compliant with the applicable securities laws, structuring strategic partnerships and creating on innovative solutions.

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Private Lender


PRIVATE LENDER CONTRIBUTORS RICK MELERO Rick Melero is Co-Founder and Principal of the HIS Capital Group, a collection of entrepreneurial real estate and lending entities. Operating from a core foundational belief of paying it forward and being of service, Rick has led HIS and various strategic alliances in the acquisition and creative restructuring of over $500 million in assets spanning 5 countries. From his humble beginnings as a wholesaler, he has established a reputation as a leading business strategist, negotiator, advisor, and educator within the industry.

MIKE PONOMAREW Michael Ponomarew joined the Factoring industry in 1999. He is the Founder and CEO of The Finance Institute. Managing Director of The InvoiceXchange. Factor member that managed $750+ million in Factoring transactions. Acclaimed industry educator that has taught over 5,000 business professionals, consultants and business owners how to profit in the lucrative Factoring industry. Contributing author industry publications and blogs, guest and key note speaker. Established and vended three successful businesses prior to joining the alternative finance and private lender industry.

KEVIN SHANE As Director of Community Development at Sharestates.com, Kevin is responsible for platform funding, institutional relationships, corporate development and marketing. Before joining Sharestates, Kevin gained his experience in marketplace lending as an early employee of Lending Club. With experience in multiple startup environments, Kevin excels at building companies and relationships. Kevin holds a BS from Babson College and you can follow him on Twitter @stogiemonster.

PRIVATE LENDER

THE OFFICIAL EZINE OF AAPL JULY/AUGUST 2014

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e k a h s o t e l b “I’m a g n i r b d n a p things u pective s r e p w e n a to things.” 6

Private Lender


Matt Ferrigno Matt Ferrigno is a Senior Loan Officer with RCN Capital, a private lender operating out of South Windsor, CT. They have approximately forty employees and a strong nationwide presence. RCN has been rapidly growing since their inception in 2010. In fact, they were just featured in Scotsman Guide’s Top Mortgage Lenders rankings! They placed third overall for volume among lenders in our space. What sets RCN apart from the competition is the flexibility of capital base - they aren’t restricted to funding a certain number of deals in particular markets with specific borrower characteristics, like some private lenders are. As a Senior Loan Officer, Matt’s day usually consists of working with brokers and borrowers on their files, collecting and reviewing all pertinent documentation, evaluating the strength of the deal, advising on loan structure and pricing, obtaining final approval and expediting through the closing process. Still, he was able to find just a couple of minutes to tell us a little more about himself. PL: Thanks for taking some time out for us today. What project(s) did we manage to pull you from? MF: Nothing too crazy right now, mostly ramping up volume this Summer which means doing a lot of smaller fix/flip or buy/fix/rent types of deals. We recently introduced a new approval process where we can now issue a commitment letter in as little as 48 hours with borrower cooperation. So that’s generated a lot of interest. We’ve also been running a rate special in Florida which, in conjunction with the hot market there, has definitely provided a nice boost in business. I have a few larger deals as well and always a couple rush files on hand. PL: It sounds like you are making things interesting. Why do you think you were you chosen? MF: Probably in part because of my age - I’m relatively young for the particular market segment we operate in

– and I’ve been pretty successful so far which tends to surprise people. But in my eyes it’s an advantage; I’m able to shake things up and bring a new perspective to things. PL: Shaking things up can be lots of fun! Why did you choose this business as one to be in, to shake it up? MF: I didn’t “choose” it so much as I grew into it. I started as an intern while I was in my senior year at the University of Connecticut’s School of Business. After graduating, I accepted an offer to come on full-time. I quickly worked my way up and became one of the most consistent topproducers. I had spent an earlier summer working at a Fortune 500 company, and while the knowledge and skills I gained there have proved invaluable, I knew I needed a more fast-paced, dynamic work environment where I could make an impact. PL: Being one of the top products, what kinds of mistakes do you see professionals make when it comes to their investments? MF: I would have to say the most common mistake I’ve seen professionals (and of course borrowers) make is over-leveraging their investments and losing big. Coming out of the Great Recession, I have seen more than a few instances of people on the rebound from these financial setbacks and it’s a sobering reminder of the cyclical nature of the markets. PL: We certainly hear the stories of the setback but, thankfully, we also hear how people persevere. We find ourselves being cheerleaders and playing a big support role at times. To keep in our support role, we found that it is so much more important than ever to stay current. What do you do to stay current? MF: I rely on the Business Insider app; I check it constantly. I also check the NYT “Deal Book” page a few times a week. Needless to say I’m more up to date on the

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•••LENDER LIMELIGHT••• economy than geopolitical issues. Although VICE News helps with that. PL: Oddly, the first thought that came to mind was the HBO Series, VEEP. That’s probably not what helps motivate or influence you! What does? MF: I have an intense drive to succeed and a strong desire to learn. In addition to working long hours in the office, I always have some side projects going. Most recently, a couple partners and I got a good deal on a foreclosure and completely renovated the home, doing all the work ourselves. It made for some long days and tiring weekends but we must have done something right as we had a buyer under contract within a week of hitting the market. PL: Congratulations! That’s very impressive and must look great on your resume. If you could change one thing on your resume, what would it be and why? MF: There’s nothing in particular I would change on my resume, I have gained valuable skills and experience from each of my previous positions. You’d be surprised how much customer service experience one can gain from a high school job as a pizza chef at a local grocery store. PL: Is there anything you would do differently if you could do it again? MF: Nothing really comes to mind – I tend to learn from past mistakes but make it a point not to dwell on them. I try to live with no regrets. Maybe in another ten years I’ll have a better answer for this question. PL: We’ll mark our calendars to make sure we come back for a follow-up interview. Have you received formal recognitions? What where they? MF: Like I mentioned earlier, RCN was just recognized as a Scotsman Guide Top Mortgage Lender for our volume in 2014. As the company’s top producer, I’d like to think that I made a decent contribution to our loan volume last year. I am also an Eagle Scout if that counts. PL: It would be a disservice to Eagle Scouts everywhere if it didn’t! If you could sing one song on The Voice, what would it be? “Come Sail Away” by the Styx. It would be epic. PL: (Laughing) Just imagining that in the Cartman voice from South Park. What is the funniest thing that has happened to you recently? MF: A couple months ago I received a letter at the office

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Private Lender

containing a small plastic bag with rotten juice and disintegrated something, I’m not entirely sure what. With it came a cryptic message about “seeing us together” and it was signed by “The Pickle Wizard.” It was way more concerning than it was funny at the time. I didn’t know whether someone was attempting to stalk or poison me or both. I still have no idea who sent it. PL: That might be more creepy than funny! There had to be complaints about the smell. What do you complain about? MF: I complain about all sorts of things - although I consider it feedback, not just complaining. As a general rule, I strive to never point out a problem without being able to offer a solution. Recently, I took issue with the fact that average closing times were increasing and management quickly took note, meeting with almost everyone in an effort to identify where the bottleneck was occurring. As a result we overhauled the process and are now able to issue conditional loan commitments within 48 hours of receiving an application. PL: What was the last thing you changed your mind about? MF: What I wanted for dinner. I am pretty confident in my decisions except when it comes to food. PL: What’s your favorite website? MF: I mainly use my phone so again I’d have to say the Business Insider app is my favorite. PL: What do you think the biggest misconception about you is and why? MF: Since I’m relatively young, people sometimes assume I’m not as knowledgeable as they are – that tends to change once I open my mouth. PL: What did you care about most when you were 10 years old? MF: I think I was relatively carefree at that age; probably cared most about hanging out with my friends and spending as little time as possible on homework. PL: We’re going to let you get back to producing after this final question: What did you want to be when you grew up? MF: I’ve always wanted to make Forbes list - it might sound cliché but it’s actually true - I’ve had a sharp business acumen since I was young. My grandfather lives on a golf course in Cape Cod. When visiting over the summer I would go out at night hunting for golf balls lost to the ponds or in the woods, clean them up, and spend the next day sitting at the tee box selling them for $5 a dozen. I was bringing in a pretty good haul for a kid in elementary school.


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•••BUSINESS STRATEGY•••

WHERE DOES BUSINESS GO WHEN THE BANK SAYS “NO?” BY: MIKE PONOMAREW

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here does a business go when it needs money to thrive? The bank.

Did you know the recent credit crisis has made it very difficult for small to mid-sized businesses to obtain traditional bank financing? Banks have been circling the wagons for years protecting their existing loan portfolio. Add in the increased regulatory scrutiny that has caused banks to boost lending standards, lowering the fraction of credit worthy borrowers. Bank consolidation has reduced the number of banks focused on the small to mid-size business sector and in many cases small business lending has become less profitable versus other types of lending. Small to mid-sized businesses that need cash to thrive are turning to the concept of factoring to sell some or all of their accounts receivable and get the money they need fast. Why will a Factor say “Yes,” when the Bank says “No”?

Defining a strong banking prospect: 1. Prospect has been in business for a minimum of two years (many banks have increased this number to three years and more to follow).

2. Prospect audited financial statements reveal solid profit margins in the previous 12 month accounting period.

3. Prospect has steady revenue growth with no “peaks or valleys.”

4. Prospect’s management team is strong with a proven track record of success in the industry.

5. Prospect has absolutely no bankruptcies or judgments in the past.

6. Prospect’s business collateral specifically, liquid

assets (Accounts Receivable, Inventory, and Machine & Equipment), are sufficient to cover any risk of default.

Defining a strong factoring prospect: • Customers (referred to as Debtors) of prospect have

10 Private Lender

a positive credit history

• Customers (Debtors) are multiple – no concentration with any one Debtor

• Debtors pays their invoices before 60 or 90 days • Debtors will verify that product or service has been received and there will be no set-offs against payments (although some factors allow for minimal offsets).

The Distinction While banks make their credit decisions by focusing on the prospect, Factors make their credit decisions by focusing on the customer (debtor). Although the comparison seems simple in nature, the impact of this difference is monumental. Ask this question: How many businesses are in your area or industry that provide a product or service to another business? Now ask: How many of those businesses are getting

Fund a new start up company Fund a company that had loses in past 12 mo. Fund a company with rapid growth but needs steady cash

Bank No

Factor Yes

No

Yes

No

Yes

paid in 30 days, 45 days, 60 days, 90 days and longer? National Average for invoices to be paid by customers across the country is a staggering 73 days. Without continuous predictable cash flow small to mid-sized businesses are being forced to make tough business decisions. Small businesses employ roughly half of the private sector labor force and provide more than 40 percent contribution to gross domestic product. If small to midsize businesses are unable to access the credit they


•••BUSINESS STRATEGY••• need to grow and thrive, they may be under-performing contributing to slowing economic growth and employment. There are troubling signs all around us and economists have been issuing warnings that another recession could be on the horizon starting this year. The concept of Factoring is recession proof. When the economy is strong, businesses will use factoring to help them accommodate the growth they are experiencing. When the economy is weak, businesses will use factoring to help them meet fixed costs and in some cases survive. Factoring is becoming the SMB alternative financing tool of choice in many cases the only choice. There are over 55 million small to mid size businesses across North America but, less than 10 percent of them use Factoring simply because most businesses and people have never heard about the concept of factoring or understand how it works.

Case Study Jammer Manufacturing is a small builder of boat trailers and related products such as trailer frames and axles in Southwest Florida. Bill James, its owner, was awarded a contract to supply the Florida Fish and Wildlife Conservation Commission with 72 new trailers to replace old units that were rusty and failing. Each trailer was $2,900 for a total value of $208,800. James had 20 trailers in inventory to begin delivery but the contract called for all trailers to be delivered within 60 days. Jammer Manufacturing had little excess capital. The problem is that the state pays slowly and Bill James knew he would not receive payment for the 20 trailers he could immediately deliver for nearly 45 days. That’s cash he needed to order bulk steel and hardware to build the remaining 52 trailers and to be able to deliver them by the 60 day purchase order deadline. James had virtually no credit history but he decided to go to a local community bank anyway, explain his problem, and request a short term loan. The loan officer explained that do to the lack of credit history, length of time in business, and the size of the orders that James’ business would not qualify for traditional bank financing. James was introduced to factoring by a Certified Factoring Specialist (CFS), a method of financing his accounts receivable that did not require a strong personal or business credit history. A Factor only looks at the strength of the customers (the company that is paying the invoices) to determine credit. Through factoring, James would receive an initial advance from the factor of $46,500 or 80 percent on the $58,000 invoice after delivery of the 20 finished trailers

in inventory. That advance of $46,500 was enough to buy the bulk steel and hardware to complete the other 52 trailers in time to meet the required delivery deadline. After the state paid for the 20 trailer shipment, the Factor would then give James the $11,500 or 20 percent not initially advanced - less a small factoring fee for services. By using the concept of factoring, James was able to put his company into a cash rich position virtually overnight. As a result, James began to bid on many more state and municipal contracts; jobs he had shunned in the past due to the slow payment policies of those entities. The factoring arrangement was exactly what James needed to take his small company to the next level. It sped up the company’s cash flow so much that James was able to pay his steel and parts suppliers within 10 days and receive a 5 percent discount for early payment from his suppliers. That discount for materials paid for almost 85 percent of the factoring fee - making the overall expense for the factoring facility minuscule. Another surprise to James was that the factoring arrangement had almost no upper credit limit. The more his company sold, the more money he would receive from the Factor. As long as James sold to approved, credit worthy customers, the Factor would immediately advance (80 percent) on each invoice once the trailers were delivered. There were no requirements for lengthy lending committee meetings to approve the credit line increase. As long as the invoices were bona-fide and legitimate, the cash was available. Now, the only limit to the growth of James Manufacturing was how many contracts James could acquire. A win, win situation.

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WHAT’SCurrent NEWS & UPDATES

Tim Rood to Deliver Keynote Address at AAPL Annual Conference

The American Association of Private Lenders (AAPL) announced that Tim Rood will deliver the keynote address at the 2015 American Association of Private Lenders Annual Conference. The Conference will be held November 8-10, in Las Vegas, Nevada and features over 25 presentations, panels and workshops Submitted Photo addressing a broad spectrum of personal real estate finance topics. Rood is Chairman of The Collingwood Group, which he co-founded in 2009. Rood was co-founder and managing director of the firm’s predecessor company, Capital Financial Solutions. Earlier he was Vice President of First American, where he successfully led the company’s professional services group tasked with creating business solutions for the top ten lenders in the country. Rood served as Director and Principal of Fannie Mae’s eBusiness Division. He has more than two decades of mortgage industry experience which has made him a highly sought after speaker and contributor to a variety of national media outlets, including; CNBC, Bloomberg Television, FOX Business News, Washington Post, New York Times, Wall Street Journal, and the American Banker.

Jaime Arouh and Bob Green join Crestar Funding. Arouh,

Top: Jaime Arouh, Bottom: Bob Green

12 Private Lender

VP of Capital Markets, is responsible for the placement of Crestar’s loan originations to institutional investors. Jaime has over 14 years experience in the trading, management and origination of mortgage-backed securities and whole loans. Green, VP of Loan Origination, has over 25 years of experience with major lending institutions including Bank United, Green Point Mortgage, GE Capital and Great Western Bank.

RCN Capital is currently seeking a motivated real estate professional to be an integral part of the RCN team as a Business Development Coordinator. The individual will work closely with RCN’s Marketing and Sales team to identify new business opportunities and develop strategic relationships. Visit RCN Capital’s career page to view this opportunity.

Southwest Airlines®—The American Association of Private Lenders Conference Airline. Beginning on August 1, 2015, American

Association of Private Lenders’ conference attendees will receive a discount and bonus Rapid Reward points from Southwest Airlines through our SWABIZ® account. Southwest Airlines is offering an 8% discount off Anytime & Business Select® fares and a 2% discount off select Wanna Get Away® fares for travel to and from the conference. Book your travel between August 1, 2015 & October 25, 2015 to take advantage of the discounted rates. (Discounts are available for travel November 6, 2015 through November 12, 2015.) Click here to take advantage of the discounted rates and book now! By flying Southwest Airlines, as a American Association of Private Lenders traveler, you will also receive the following benefits: 50% bonus Rapid Reward points for your travel to & from the convention with Rapid Rewards # added to your reservation. To enroll in the Rapid Rewards program, visit www.southwest.com/corporaterapidrewards

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•••BUSINESS STRATEGY•••

MEASURING YOUR PRIVATE MONEY LENDING BUSINESS WITH A SWOT ANALYSIS BY: COREY CURWICK DUTTON

W

ould you like to analyze your private money lending business using a simple but effective tool? This classic tool is called a “SWOT” Analysis and may be able to help private money lenders that are seeking to grow their private money lending businesses or to review their current strategies.

don’t just guess about your strengths. Seek input and come to an agreement or consensus among your team or with other constituents of your organization about what your strengths are. Once you identify your strengths, then the real work begins. How can you best emphasize these strengths and continue to take advantage of them to their maximum potential? Incorporate these strengths into your business plan “There are a multitude of and decide how you intend to make them free business software part of your core competencies as an applications that can save organization.

What does the acronym, “SWOT” stand for? Strengths = “S,” Weaknesses = “W,” Opportunities = “O,” and Threats = “T.” The Strengths and Weaknesses are identified internally, while the Opportunities and a business hundreds even Threats are identified externally. If you WEAKNESSES: What are your thousands of dollars per are a private money lender, you should company’s internal weaknesses? For year.” write your own SWOT analysis to help example, does your lending business in evaluating your lending business or have a real competitive advantage in current strategy. This simple tool will help you look at both its markets? If the answer is no, this could certainly be a the “inside” and the “outside” of your business. weakness. How is the political & regulatory environment affecting your business? What about your online A SWOT Analysis asks a series of questions about presence? Can potential borrowers and brokers find your business model or strategy to identify, not only the you online? If not this could be another weakness. High internal strengths and weaknesses, but also the external fixed costs could be another internal weakness that may opportunities and threats. Get input from as many people be identified. For a lending business, high fixed costs as possible when writing your SWOT Analysis. Not sure can mean demise if loan volume experiences extreme where to begin? Let’s go through some examples. Try ebbs and flows. How are you using technology in your and think of your own lending business or your business lending business? There are a multitude of free business model as we go through the following examples: software applications that can save a business hundreds, STRENGTHS: What are your company’s internal even thousands of dollars per year. How are you making strengths? These are a company’s internal capabilities, the best use of available technologies to save on your resources, competitive advantage, etc. Some examples fixed costs or in streamlining your operations? This could in a private money lending business are: fast turn around be another possible weakness in your lending business. times, good customer service, strategic pricing, word of Once you have identified some potential weaknesses, mouth referrals, strategic relationships, etc. These are then it’s time to formulate a plan for how you will overcome just a few examples of some strengths. But remember each of them and then execute on it! These weaknesses your company’s strengths are not necessarily what you could stand between you and the longevity of your lending say they are, or what you wish for them to be. Determine business. what is the reality of your business today and then try OPPORTUNITIES: What is going on outside your to use real data to back up what you have identified as company that represents potential opportunities for your your company’s strengths. If possible, get input from your company? What opportunities are out there to be taken team or as many other constituents as you can. Again,

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“Working with Geraci Law Firm has been an incredibly valuable experience for us. They are the most knowledgeable and dedicated authorities in real estate based private lending. We always feel that Geraci really understands our organization and what we need to help others with their success.� ~ Matt Benson, Executive Director, Directo American Association of Private Lenders. WILL YOU BE OUR NEXT SUCCESS STORY? Call us at (949) 379-2600 or email our Director of Communication, Kim Caldwell, at kim.caldwell@geracilawfirm.com and ask us how we can help you become stronger.

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•••BUSINESS STRATEGY•••

advantage of in both the short-term and in the long-term? As every private lender knows, you must evolve your product offering to the demand of the market. What types of loans will be in demand in the short-term and why? Commercial Mortgage Backed Securities are coming in waves this year and in coming years, so this will certainly increase the demand for commercial refinances. Bank lending standards remain stubbornly high over the shortterm, and this also represents opportunity for non-bank lenders. Will your trust deed investors be searching for investment opportunities in coming months and why? Another possible opportunity. THREATS: What is going on outside your company that represents potential threats to your business? For example, the high cost of compliance under the DoddFrank Act has forced many lenders out of the U.S. mortgage market altogether. How have new regulations under Dodd-Frank affected your business and are you in compliance? Other examples include: increased or new forms of competition such as crowd funding platforms, a real estate market correction, sub-prime loans becoming

16 Private Lender

readily available again, etc. Have you considered how future changes in the lending environment could affect your business? What about the general state of the U.S. economy? How could this pose a threat to your business? These are just some examples for each category, so consider your own questions and answers when writing your SWOT Analysis. By writing a SWOT Analysis for your own lending business, this simple but effective tool may be able to help you grow your private money lending business this year. By evaluating your lending business as it stands today, while also identifying potential opportunities and threats in the future, your lending business has an increased chance of longevity and profits. And, isn’t that what every lending business wants?

Interested in writing for Private Lender and getting in front of thousands of real estate finance professionals? Contact us today! PrivateLender@aaplonline.com


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Abhi’s

REAL DEAL

PERSPECTIVE #RealEstateDealTalk


•••PERSPECTIVE•••

1693 Hosea L. Williams Dr. I

n the previous issue of Private Lender, I told a story about a real estate flip opportunity located at 1693 Hosea L. Williams Drive in Kirkwood, Atlanta, GA we purchased in late 2013. It was a project where we created substantial value for our lender to work together and capitalize on market trends, due diligence, and our experience and insight of the area. Let’s summarize the story thus far.

Summary In hunting for a good flip opportunity, we identified and researched important trend indicators such as: Population density, median household income, median house/condo, median gross rent, average household size, median age, percentage of people with bachelor’s degrees, and percentage of people who are renters.

Image A: Front of 1693 Hosea L. Williams Drive

From our analysis, we determined 30317 was a good zip code to start our search. We sought additional confirmations of our findings by speaking with our team of real estate agents, fellow builders, and real estate investors.Concluding our research, we identified a few guidelines that would narrow our search:

• • • •

Price: less than $100,000 2 bedroom, 1-2 bathrooms Retail days on market: less than 45 Renovation with no permits

After calling endless real estate professionals and hunting for available inventory, we came up empty-handed. It was to my surprise when I check my LinkedIn inbox, there was potential gem waiting for me. The property was a 3 bedroom, 2 bathroom, 1,430 square feet, rough condition, and needed a little bit of work (see Images A, B, and C).

Image B: Front porch of 1693 Hosea L. Williams Drive

From the initial due diligence and comparable searches of activity within 0.5 miles and a timeline of less than 6 months, we determined the ARV for this home would be $300,000 and would sell within 30 days after completion of the renovation. Overall, it looked to be a decent flip opportunity, or so we thought until we walked it.

The asking price? $110,000. Our thoughts? Absolutely not.

Image C: Windows on East Side of 1693 Hosea L. Williams

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•••PERSPECTIVE•••

After deploying a few negotiation strategies, we accomplished the following:

• • • •

built a strong relationship with the seller, educated the seller, decreased the purchase price to $68,500, and beat the other investor competition and got the deal (see Image D).

Change-Up Our original plan for this project was to demolish the existing home and build a new traditional craftsman home in its place. This one-story home would feature 3 bedrooms and 2.5 bathrooms with a livable area of 1,800 square feet. The total build cost was $140,000 with a resale of $350,000 with an expected 30-45 days on market. The adjusted project numbers for our original plan were: Purchase Price: $68,500 Original Plan Construction Budget: $140,000 ARV: $350,000 During the following 3-4 months after purchase, we worked diligently to complete the steps required to permit our original plan. After submitting drawings, plans, and additional changes to the City of Atlanta, we were just a few weeks away from obtaining demolition and build permits. It was then we decided to change our plans to a 2-story. Doing so had a severe affect on the capital structure, timeline, and processes for this deal. Let’s take a deeper look why.

Image D: Zillow screenshot of 1693 Hosea L. Williams showing purchase price.

The project numbers for a renovation of the existing home were: Purchase Price: $68,500 Renovation Budget: $120,000 ARV: $325,000 Upon additional analysis of recent sale trends in the area and the high cost of renovation, we considered building a new home instead of renovating the existing home. The biggest reason for this was the contractor quotes to renovate were nearly identical to building a new home. Therefore, we decided to demolish the existing home and build a new one. However, in the process of obtaining permits for the 1-story home we were to build, we decided to add another story and increase the square feet of the home. Was it worth it? The story concludes next.

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Our modified plan was still to build a new home, however, we would construct a 2-story craftsman home (instead of a 1-story) featuring 4 bedrooms, 3 bedrooms with a livable 2,300 square feet (see Images E and F for elevations of the proposed new home). The “hopefully-worth-it” adjusted project numbers were: Purchase Price: $68,500 Modified Plan Construction Budget: $200,000 ARV: $475,000

We were comfortable in making this adjustment because based on the research, we predicted home sales in Kirkwood, a neighborhood in East Atlanta, were increasing at a higher-than-normal pace. More importantly, there was high demand for a 2-story home with an open floor plan.

Boy did we predict correctly! Within 1 year of purchasing our property, lot prices increased to $120,000. This is a 50%+ increase in value! Under normal circumstances and market conditions, we would have chosen to build the 1-story and call it a day. As you can see, the increased cost of adding a story


•••PERSPECTIVE•••

Image E: Front Elevation for 1693 Hosea L. Williams Adjusted 2-story Plan

Image F: Rear Elevation for 1693 Hosea L. Williams Adjusted 2-story Plan

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•••PERSPECTIVE•••

Abhi’s Quick Tip Stay focused. Build Trust. Push Hard. and building a bigger home featuring more bedrooms and bathrooms would be well received by the community, yielding higher ARV and net profit numbers. However, switching to this plan didn’t come without its own challenges and setbacks.

Affect on Capital Structure In most cases, lenders will not extend notes past the agreed-upon term. However, depending on the relationship you have with your lender, they may work with you. In our case, the term was 12 months, which we needed to extend. After demonstrating to our lender that the additional capital requirement will help to build a better home for the neighborhood and will allow for a quicker sale, he agreed to extend the note. Consider if the lender did not agree to extend: can you say foreclosure? The most important word here is: trust. We focus on building strong, trusting relationships with our lenders and investors. Also, we interview them to ensure they have a history of investing in real estate, which is crucial for complex projects. If we do not actively communicate with our lenders and keep them in the loop with next steps, intentions, successes, and setbacks for each project, they may decide against lending to us in the future. Trust, transparency, and communication is required especially in the case of new construction projects as the asset the lender is securing capital with must first be demolished and then built from the ground up.

Affect on Timeline & Processes After adjusting plans from a 1-story to a 2-story new build, expediting the timeline became a pressing challenge for us, as time was not on our side. The issues that we faced included:

• creating and re-submitting new architectural and site plans to the City of Atlanta for approval,

• working with building and site reviewers to address requested change comments,

• changing the majority of our initial orders with suppliers for building material (e.g. lumber package, windows, roofing, etc) to match the City-approved plans.

• finding another general contractor to replace the

22 Private Lender

one we fired during the initial stages of the project, and

• meeting with new inspectors to complete preconstruction plans and requirements.

As a result, the overall timeline to obtain the approved permits and start work increased by 4-5 months! Delays such as this can be detrimental to the performance of any deal. However, staying focused and working through the challenges with the City and proper communication with the lender and our project management team was crucial to our success. We were able to cover more ground and move quickly to achieve the construction milestones in place for timely completion of the project.

Success! 1693 Hosea L. Williams is under contract at $485,000.00. In finishing this story, I must say, I love this game – with all the successes and failures it brings.

To see other episodes click here and subscribe to Abhi’s channel!

Abhi’s

Real Estate Deal Talk Episode # 7

Why We Passed on this Renovation in a Sizzling HOT Old Fourth Ward (Atlanta)


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•••LEGAL•••

UPDATE: “REGULATION A+” APPROVED BY THE SEC BY: KEVIN KIM

T

he Securities and Exchange Commission (the is not a private securities exemption. In exchange for “SEC”) has recently approved an amendment SEC approval, maximum offering amounts, ongoing SEC to Regulation A (“Reg A”). Previously, Reg A reporting, and other regulatory hurdles, Reg A+ offerings was a small scale semi-public offering of “unregistered are not restricted based on their ability to advertise securities” capped at $1.5 million in twelve months. and admit non-accredited investors. Admission of nonToday, Reg A has been modernized into “Reg A+”. The accredited investors, secondary transfers of securities, SEC created two tiers within Reg A+: Tier One and Tier and pre-offering and standard general solicitation and Two. Tier One permits an issuer to raise a advertising are all fair game. maximum of $20,000,000 in a twelve (12) “Overall, Reg A+ will grant Tier One is designed for small month period. Tier Two permits an issuer greater flexibility to those businesses which intend to raise capital to raise a maximum of $50,000,000 who wish to raise capital in a handful of states. Although it in a twelve (12) month period. Each from a broader audience...” has a lower maximum offering limit, it Tier One and Tier Two have different requires no ongoing reporting or audited requirements and restrictions. (See below financials. Alternatively it does require for differentiation). state securities regulatory compliance, but it is likely Overall, Reg A+ will grant greater flexibility to those that wish to raise capital from a broader audience including both non-accredited investors and accredited investors. Furthermore, Reg A+ will permit advertising, general solicitation and pre-offering “test the waters” types of solicitation. Reg A+ will also remove the restriction on transfer and permit a limited number of secondary sales of securities. For those issuers that seek to raise capital via crowdfunding, or merely wish to raise capital from a broader audience of investors, Reg A+ will provide greater flexibility than Regulation D (“Reg D”) thereby creating greater capital flow and greater access to the capital stack.

As with any regulation, there are specific restrictions to qualify an offering under Reg A+. Some key restrictions include: (1) Reg A+ offerings must submit all offering documents to the SEC for approval prior to starting the offering; (2) Reg A+ Tier Two offerings will be required to comply with financial reporting requirements including audited financials, in addition to periodic SEC reporting similar to a publicly registered company; and (3) Reg A+ Tier Two offerings can admit unlimited number of nonaccredited investors with the caveat that they are limited to investing a maximum of ten percent (10%) of their annual income or net worth. Unlike other securities regulations like Reg D, Reg A+

24 Private Lender

that almost every state will participate in a streamlined approval process implemented by the North American Securities Administrators Association. Since Tier One does not require ongoing reporting, the SEC decided it should still be subject to the 2000 investor limit imposed by Section 12(g) of the Securities Exchange Act of 1934 (the “34 Act”) (as amended by the JOBS Act), much like Reg D offerings. Fortunately, unlike Reg D, the maximum number of non-accredited investors that are admissible is substantially greater: 500 non-accredited investors are admissible under Tier One. Tier Two is designed for more seasoned issuers seeking to raise capital on a much larger scale. Although it requires ongoing periodic reporting and audited financials, it preempts state securities regulations much like Reg D and is exempt from Section 12(g) of the 34 Act. This means that Tier Two offerings can admit an unlimited number of accredited and non-accredited investors.

Notwithstanding the increased compliance and due diligence will prove to be a worthwhile investment for the added benefit of advertising, secondary transfers, and reduced investor eligibility requirements. This flexibility creates a realistic opportunity to issuers who seek to develop crowdfunding platforms and issuers who are limited by Reg D. Below are some highlighted terms of Reg A+.


TIER 1

TIER 2

Maximum Offering Amount

$ 20,000,000 IN 12 MONTH PERIOD, with not more than $6,000,000 in offers by selling security-holders that are affiliates of the issuer.

$50,000,000 IN A 12 MONTH PERIOD, with not more than $15,000,000 in offers by selling securityholders that are affiliates of the issuer.

Eligibility

• Must be organized or have principal place

• Must be organized or have principal place of

• No SEC reporting Companies / registered

• No SEC reporting Companies / registered or

• No Issuer subject to SEC action within

• No Issuer subject to SEC action within past five

• No Bad Actors

• No Bad Actors

Blue Sky (State Law)

Must comply with all state registration/ qualification laws in which investors reside.

State laws are preempted. No Blue Sky compliance required.

Offering Statement

• • • • •

• • • • •

of business in US or Canada

or required to register under Investment Company Act of 1940. past five (5) years.

Non-Public draft submission permitted Online Submission Permitted SEC Approval Required. Specific Formatting (Form 1-A) Financial Statement required

business in US or Canada

required to register under Investment Company Act of 1940. (5) years.

Non-Public draft submission permitted Online Submission Permitted SEC Approval Required. Specific Formatting (Form 1-A) Audited Financials Required

Investor Eligibility

NONE

Non-Accredited Investor s are limited to ten percent (10%) of annual income or net worth (whichever is greater)

Solicitation Materials

• Test the Waters” solicitation of potential

• “Test the Waters” solicitation of potential

• General solicitation, advertising, etc.,

• General solicitation, advertising, etc. permitted

• Exit Report within 30 days of termination/

• Exit Report within 30 days of termination/

• No other ongoing reporting

• Provide investors special financial reports

offering permitted

permitted after offering statement is approved.

Ongoing Reporting

completion of offering.

offering permitted

after offering statement is approved.

completion of offering.

(where applicable) between Form 1-A filed and First Periodic Report filed.

• • • • Total Number of Investors Limit

2000 Accredited Investors and/or 500 non Accredited Investors

Ongoing Periodic Reporting: Annual – Form 1-K Semi Annual - Form 1-SA Current Events - Form 1-U

NONE


•••BUSINESS STRATEGY•••

PRIVATE ONLINE LENDING: THE NEW ALTERNATIVE ASSET OF CHOICE BY: KEVIN SHANE

A

lternative assets have always been an investment typically reserved for the ultra-high net worth individual and for institutional investors like hedge funds, private equity funds and venture capital funds. The retail investor has had little to no access to some of the most lucrative investment opportunities available. Instead of being able to be an early investor in a company like Facebook or Uber, retail investors have been stuck with taking risks on penny stocks that have the ability to lose 99% of their value in one day.

space. Previously, private (non-traditional) lending was only available to institutional investors and hard money lenders. Now, this new form of private lending is open to a much wider audience that includes accredited investors and non-accredited investors. Let’s briefly define what an accredited investor is: An accredited investor is any individual with at least $1 million in net worth (excluding their primary residence) and/or $200k in annual income for the past two years and foreseeable future (or $300k per couple).

With any unfairness that affects a large Since it is a new industry, some may think “As time goes on and the amount of people, there are always that it’s a full-out Wild West scenario out online lending industry going to be people and companies there. It’s not. The Securities & Exchange continues to prove itself, looking to disrupt the status quo. Take Commission (SEC) regulates this space more and more investors Lending Club for a great example. Back to an extent. Due to restrictions, some are going to allocate in 2007, their founder saw an opportunity of these online lending platforms are investment dollars into it.” to allow individual retail investors to take limited to only institutional and accredited the role of a bank in the consumer loans investors. Lending Club and Prosper are equation. This concept of peer to peer open to non-accredited investors in most (P2P) lending allowed consumers to borrow money for states due to certain filings that they had approved by things like credit card refinance from other individuals that the SEC (S1 filing). Most other online private lending were looking for a greater yield than their savings account platforms are only available to accredited and institutional offered. The P2P lending phenomenon that kicked off investors. For a user to verify accreditation with any of in 2007 has only taken off over the past few years. Now these platforms, they are required to check a box upon it’s a multi-billion dollar industry, with the two top players registration, indicating that they are accredited. (Prosper being the other) having syndicated over $13 This type of online private lending, driven by consumer billion (#1 and #2) in loans alone. In December 2014, we loans, has spread to other asset types including small even saw our first IPO in the industry with Lending Club business loans, solar loans, real estate loans and more. going public (Ticker: LC). That $13 billion in origination Soon after Lending Club debuted on the NYSE , a equates to over $1 billion in interest paid to investors-company called OnDeck Capital (Ticker: ONDK) started that include both institutional, accredited (high net worth trading on the NASDAQ--the leaders in online lending for individuals) and non-accredited investors. small business loans. If you’ve ever had student debt, With the success of these two peer to peer lending stars, an entire industry blossomed in only a few years, reaching multiple asset types. The P2P industry is also known as marketplace lending, direct lending or online lending--take your pick. Not only is this space making in a dent in the banking industry, it’s also transforming the private lending

26 Private Lender

you’ll be happy to know that there’s a company called Sofi that focuses on offering more competitive rates and refinancing options for student loans. And if you’ve got a green investment thumb, Open Energy Group offers an alternative investment for the debt financing of solar projects. These are just a few examples of what’s


•••BUSINESS STRATEGY••• spawned from this online lending explosion. So many types of businesses are getting into or have already entered this space, but none is more exciting than real estate online lending--also referred to as real estate crowdfunding. Private lending for real estate has traditionally been referred to as hard money lending, so real estate crowdfunding can be considered hard money lending version 2.0. The idea is simple. A sponsor (the borrower who is a real estate owner, developer or rehabber) applies for a loan or equity raise through an online platform. If approved, the project gets posted to a website for investors to invest small to large amounts of capital directly into the real estate project. It’s the ageold process of syndication, with a technology element to make it more efficient, easier and much sexier. Real estate crowdfunding has attracted tens of thousands of accredited investors (yes, most platforms are only open to accredited investors due to SEC regulations) to register and build their real estate portfolios. There are a few main reasons why many investors have made this investment the alternative asset of choice:

1. Projected net annual returns generally starting at 10%

2. Collateralized asset 3. Simple and passive investment strategy 4. Transparency on each individual real estate project 5. Minimums starting as low as $1000 6. Access to real estate investment opportunities that may have been previously inaccessible

When it comes to borrowing money through a real estate crowdfunding platform, sponsors also reap a few key benefits that make it an attractive source of capital:

1. Quick access to capital with ability to close a loan or equity raise in a few days

2. Competitive private lending rates 3. Marketing benefits for projects that qualify In addition to real estate crowdfunding having an attractive investment profile, it also has the potential to be the largest asset type out of all online lending types (consumer debt, small business loans, etc). This is not only because it’s a larger market overall (real estate lending market is estimated at $10.8 trillion), but because it’s also a collateralized asset.

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•••BUSINESS STRATEGY••• There’s that extra layer of comfort knowing that a tangible asset is behind this type of investment. Online lending as an investment is here to stay. All in, there’s over $20 billion (rough estimate based on largest players whose statistics are publicly available) invested through online lending--consumer debt, small business debt, real estate debt, etc combined. As time goes on and the online lending industry continues to prove itself, more and more investors are going to allocate investment dollars into it. We’re already starting to see investment advisors (RIAs) steer their clients into this asset class. Within five years, online lending will be a part of the average investment portfolio, just like stocks and bonds. It’s only a matter of time.

Interested in writing for Private Lender and getting in front of thousands of real estate finance professionals? Contact us today! PrivateLender@aaplonline.com

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•••MANAGE & LEAD•••

PEOPLE DON’T LEAVE BAD COMPANIES, THEY LEAVE BAD MANAGERS BY: LINDA HYDE

D

ealing with a controlling boss is difficult but what if they aren’t aware? When a meeting begins with,“I am not a micro-manager” in one breath and dictations begin in the next, it is a classic sign of micromanager - even if they don’t know it. In fact, most micromanagers don’t know that is what they are doing while it’s harming their team’s morale and – ultimately – their productivity.

behavior, some strategies can be used to help you stay on your career path while maintaining a professional relationship:

1. Keep them abreast of any changes in the project or business,

2. Proactively set your own expectations and timeline prior to them asking,

3. Send an update to any timelines that had been While paying attention to the details and making sure previously set so they can manage their expectations, all tasks are getting done to ensure success is important, maintaining control of every aspect of the 4. Show them you are trustworthy, project is not necessary. Micromanaging thorough and on top of your work. “We all have the propensity will get the short term results but As a valuable employee, give it a few to be a micro-manager...” ultimately over time it will negatively months to see change. If nothing seems impact the team, the business, and to work, it might be time to move forward careers. The team becomes dependant to an environment that is a better match for your work for every decision, creating organizational vulnerability style. As Marcus Buckingham said, “People don’t leave when they are not permitted to be present or heavily bad companies, they leave bad managers.” It is good involved. to remember that many of us have the propensity to be While it can be tough to get a manager to change their a micro-manager, but some of us reign it in better than others. WHAT A MICRO-MANAGERS REALLY MEAN WHEN THEY TRY TO EXPLAIN THEIR BEHAVIOR Don’t take the excuses at face value. WHAT CHRONIC MICRO-MANAGERS SAY

WHAT THEY REALLY MEAN

It will save time if I just do it myself.

I don’t believe it’s worth my time to let them try, because they won’t get it right anyway.

Too much is at stake to allow this to go wrong.

I don’t trust them to do their jobs according to my standards.

It’s my credibility on the line if we don’t get it done on time.

The work won’t get done unless I constantly prod them.

When Im not involved, they mess up.

The one time I yielded some control, there was a mistake and I’m not willing to take that risk again.

My boss wants me to be heavily involved in my team’s work.

If I don’t stay involved, how else will I prove my worth?

SOURCE: Muriel Maignan Wilkins, Co-Author of Own the Room: Discover your Signature Voice to Master Your Leadership Presence

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•••MANAGE & LEAD•••

TREND ALERT: SOCIAL MEDIA INFLUENCER MARKETING BY: CHRISSEY BREAULT ne of the most powerful concepts in marketing is the voice of the customer. Today, the customers’ voices are projected through giant megaphones provided through social media platforms.

O

contribute to the web? By creating and contributing valuable content you highlight yourself as a subject matter expert, which builds trust, and then sales or deals. Consider it an overall career enhancement.

Let’s start with framework

What’s the plan?

Influencer marketing can be loosely defined as a form of Playing a role in social media through blogs, awesome marketing that identified and targets individuals who have e-zine articles such as those found in Private Lender, influence over potential buyers. It isn’t just characterized Facebook, Twitter, LinkedIn and the plethora of similar by having a lot of followers or fans. It’s also driven by channels takes time out of your day. Effective posts by expertise on subject matters and the efficient bloggers can be created in twenty relationship between the influencer and minutes. Don’t start off thinking that you “Consider it an overall their followers. will be effective or efficient and not leave career enhancement.” enough time for yourself to develop your It happens when marketers create a voice. In many cases, it could take an hour list of influencers: regular people – not or more. You need time. Take it. movie stars – who have blogged, videoed or podcasted themselves into a social celebrity status. (See Private Lender’s May/June edition). Those influencers have proven credibility and sometimes sales to specific target audiences.

It’s not only Lipstick and High Heels While most statistics about social influencers taught fashionista and makeup artists there is a large space for entrepreneurs. Many of those influencers have grown so big that they actually get advertisers to put ads on their content, they also act as influencers for others in their industries. These social influencers aren’t paid for their comments from the advertiser’s brand, they look for and share information their audiences want. In a poll conducted by Tomoson (next page, top) and reported in AdWeek, marketers rated influencer marketing as the fastest-growing online customer acquisition tactic, beating organic search, paid search, and email marketing. The same study (next page, bottom) reported 59% of marketers plan to increase influencer marketing budgets over the next 12 months. In a world that seems flooded with celebrities, teenagers, and mommy bloggers why is it important for you to

32 Private Lender

Create a “tool box” that includes: familiarity with SEO/ SEM, other influencers who can act as role models to draw on, and positive, supportive people around you. In the days where you are just starting to get your feet wet, you have no audience, enough interest in a topic to keep deepening your knowledge base, and are working on building your initial presence, you will need a state of mind that prioritizes your contribution to build a community on.

You know that you’re a gifted expert in what you do but are there enough people writing about what you’re writing about already? Do they cover your viewpoints? Is there really scope for a new voice? Do your research…..or due diligence! Good contributions come from people who feel there is a certain spirit missing from the crowdsourcing pool. When networking with other writers they might claim that they write simply for their own benefit and a community “accidentally” grew. Well, that is possible but it’s more likely that those people set out with the objective of having an influence. Discovering your point of view allows you to stand out from the crowd. When you are reading an article or blog post do you think that author is a born writer? Honestly, some people are. Now, they have so many opportunities to exploit that


•••MANAGE & LEAD•••

talent. But, just like everyone else those people need to practice – every day. Our elementary, junior high, and even high school teachers won’t be disappointed that we don’t all carry an understanding on everything that can go wrong in a sentence. It’s a lifetime’s work. Some social platforms don’t help much, either. We are all guilty of hanging or fragmented sentences at some point. Say it: Dangling Participle. Fun to say, right? Just a little bit ago finding your voice was alluded to. What is your voice? Do you need to be a voice of your employer’s brand? Is that authoritative, infused with detail, descriptive (with dangling participles), or conversational? The quickness of which people grab information on the web continues to increase so there is importance in finding a style that is to the point and clearly states the vital information of your post. Try different approaches early on – while your community is still on the small side.

Headlines can be daunting but are the most important piece of your blog – you will need to grab attention, evoke emotion. Doing a simple Google search on how to write a headline makes it look like a skill that you need to go to the World’s best vocational school to learn appropriately – maybe there should be a MBA in Headline Writing? One of the best practices to follow in your writing is to make your title and the first paragraph reflect what your post is really about. Bonus! That will also contribute to your SEO. Let’s say you are writing like Hemingway, Orwell, Plath, Capote, or Seuss now. Where are you putting all this expert information you have created? In a marketing world, most traffic should be driven back to your website to help you with sales or deal conversion. Do you have a content driven website? You could set up a blog on a number of platforms if you don’t have a website created (slap on the risk if you are running a business without

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•••MANAGE & LEAD••• one) or are just looking for a better home on the web. In the past couple of years the blogging platforms have changed dramatically, be sure to do some research to find the platform that covers your needs the best. Consider things like integration with an existing website, ability to post video, ad placement, custom plugins, the ability to schedule posts, storage capabilities, level of customizable CSS & HTML required, availability to your own domain, etc. It pays to find professional platforms, like an online magazine in your industry. (Hint. Hint.) It can be tough to get on some platforms if your approach doesn’t include writing experience. Be prepared with some samples of your writing and a great pitch. It may be that you need to spend a few months blogging and then start to pitch platform editors to see if they’ll take some of your work. Remember, if you don’t at least ask, you will never hear “yes!”

“On a Platform I’m Gonna Stand and Say” There is no natural community building mechanism around blogging. Don’t let that discourage you. There are a variety of community building social channels that shouldn’t be underestimated. Look at channels like Facebook, LinkedIn, Pinterest, Twitter, and even Tumblr to build your fan base. You can repost your work to LinkedIn and Twitter to help distribute your creative, yet informative writings. When you do score the opportunity to be a guest writer, always find a way to draw people back to your other work. Powerful influencers are visible on multiple platforms. Be cautious as a guest writer, you may be agreeing to provide “exclusive” content to the professional platform. Ask what the parameters are for exclusivity. Those running the platforms also want to be influencers and should be willing to work with you. In the earlier days of blogging or guest writing the comments were used as an indicator of influence. Marketers and writers alike believed that it was a sign that people were listening and engaged. Makes sense, right? Today, people are happy if their work is retweeted or shared so the skill lies more in the building of followers on the chosen platforms or social channels so that you can share your work and let it be shared. Those who do leave comments and engage with you and your writing shouldn’t be ignored. Interacting with your community is just as important as the original writing

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you posted. In many cases, negative comments will be “policed” by your existing community. As the virtual leader you will want a plan or strategy for the best approach to cultivating your online community. It could be as simple as acknowledging a post, “Thank you!” Pay attention to your audience and respond appropriately. You can’t ever stop learning what your audience(s) value. Set yourself some metrics around your audience, repeat visitors, and find writers who can be role models and benchmarks, too. The very nature of the Internet in the past few years has increased collaboration and sharing. 2014 signaled a power shift in terms of influence, from brands to content creators. 2015 is about personalization and specialization, developing much better systems for brand loyalty and ways for consumers to experience your brand. With the emphasis on the interest communities, content creators become more important, and brands should seek ways to create mutually beneficial and genuine relationships with brand advocates, who will create value for them. As the consumers increase their confidence in user recommendations versus brand advertising, users themselves should be entered in the marketing mix, at least as content producers. Remember, people have always counted on recommendations from their peers when they have a decision to make. In fact, recommendations from parents, friends, and colleagues have always been the heart of any buying or deal process, much more than traditional media and advertising ever could be. Social Media makes this even truer. Social influencers create brand endorsements, their audience (online community) drive endorsements through engagement with influencer content. So much so, that higher levels of brand social engagement are now being linked to increased sales.

What are you waiting for? Get out there and provide your followers with your phenomenal, premium content. Reward them with unique experiences, and of course, don’t forget to provide unique viewpoints so they will talk about you on and offline!


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The American Association of Private Lenders reaches the most tightly targeted audience of Lenders, Fund Managers, Brokers, Investors, Property Managers, and Service Providers in the peer-to-peer lending community. It is the voice of the private lending industry. As such, advertising with the American Association of Private Lenders is an excellent investment and the ideal medium to reach anyone in the private lending industry. Contact us today for more information!

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