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
