Originate Report - February 2020

Page 32

Where Most Private Lenders Go Wrong Scaling Their Business By Abhi Golhar

F

ollowing the Great Recession

continues to evolve, private lenders,

surprise outcomes are likely to be

that hit the United States

both big and small, must become

negative for you.”

in 2007, the private money

more agile and continuously adapt to

- Nassim Nicholas Taleb

lending industry has significantly

overcome increased competition.

evolved. Prior to 2008, private mortgage lending was dominated by

So, what do private lenders really

a handful of very large companies

need right now? Strategies on the

— Landmark Capital & Investment

best ways to scale your business so

Company, Mortgages Limited, and

you’re set up to support growth in

IMH Capital, to name a few. Along

your organization. And guess what?

with these major players, a few

All it really requires is a little bit

smaller ones poured in and managed

of planning coupled with the right

to compete on a small scale.

technology, processes, and partners. Before we can identify how to scale

Lagging Behind The Competition Consider the enormous size of real estate lending today. The Fed’s recent report shows mortgage debt topping $9 trillion. When accounting for lending to businesses, it tops $15 trillion. And, over 10 million commercial properties and homes sell each year in the US.

Back in those days, private money

your lending business, let’s first look

lenders could easily charge higher

at some of the common problems

fees since there was very low supply

faced by private lenders today.

converging

to take an aggressive approach and

day, it’s no surprise everyone wants

Challenges Faced By Private Lenders Today

a piece of the market. As the industry

“If you are in banking and lending,

rates, making deals a lot riskier.

and a comparatively high demand for capital. Fast forward to present

32 Originate Report February 2020

As more capital enters the space to

lower

yields,

competition is forcing private lenders write loans at higher loan-to-value


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