Does size really matter?

I’m sure everyone has gotten various e-mails trying to help address the question of size with various remedies.  Fortunately in this e-mail I’m going to focus on a more mundane topic; does the size of a hard money / private lender matter?

Just this week I’ve closed two transactions as a result of other lenders size.  First, I closed on an investment single family home south of Denver.  The borrower had plenty of equity, but needed cash quickly for another venture.  He had been working with another lender since November to try and get his transaction funded, the “private lender” said that he would fund the next week (this went on for 8 weeks).  It turns out the lender was a small local hard moneylender that was tight on funds and therefore unable to close.  I got the call last week, inspected the property (we don’t need an appraisal since we are direct lenders and lend our own funds), and closed and funded the transaction this past Wednesday.  The borrower and broker were ecstatic since we were able to save their transaction

Second, I got a call about a year ago from a borrower on a commercial building in Atlanta; I had originally committed on the transaction.  The borrower ended up using another lender that was marginally less expensive.  Last week, the same borrower called me in a panic.  The “great private lender” he had done a loan with only that supposedly saved him money gave him a one year note and would not renew the note.  The borrower had to take out the other lender since he was about four months away from being able to get a conventional loan.  Fortunately I was able to do the loan and give the borrower the time they needed.  If the borrower had taken my original proposal, he would have had a 3 year note with no prepayment penalty and actually saved substantial money.

In both cases above the lender size was a factor.  In the first scenario, the hard money lender was a small lender and therefore unable to fund when the borrower needed the money.  In the second case, the private lender was a larger lender with very rigid loan guidelines and parameters and unable to accommodate the borrower’s needs.

So how do you find the right size lender?

When selecting a hard money lender, the borrower/broker needs to go with a lender that is not too big and not too small.  The interest rate is not the only factor in deciding on a lender.  There will always be someone trying to offer the best rate in town.  Unfortunately hard money lending is not a commodity like a car.  In the hard money arena each situation is very unique with special requirements that must be met.  The perfect lender is a mid-size lender like Fairview that is big enough to fund all your transactions, but not so big that the flexibility has been lost.

At Fairview we have ample capital to lend and can close transactions quickly.  Since we are funding our own loans we are able to structure deals that make sense for the borrower and give them ample time to accomplish their goals (our standard procedure is to do a 3 year loan).  Fairview also doesn’t require any upfront fees or appraisals like most lenders.  Give us a call (or fill out our easy one page application) to discuss your scenario and see why Fairview is “just the right size” for you and your clients hard money needs.

By Glen Weinberg

COO/Partner Fairview Commercial Lending