Category : Blogs
Mass Impedes Movement
Lets Clear Things Up
There seems to be this widespread misconception out there that private lenders exist only to service a market of credit poor or unbankable clients. This could not be further from the truth. The name of the game is speed. When borrower has the asset in their sights the timer has already started.
This brings me to my point, larger things tend to be less agile. Prominent banks are massive bureaucracies that are burdened by books of regulation, massive splintering chains of command, and loyalties to the interests of government institutions as opposed to the customer. For example, you may not qualify for an SBA loan if you are considered an “excluded business type”. For the businesses they will lend on, they need an excessive amount of time to make sure the deal passes through the checks and approvals of many hands before the deal goes anywhere. This may work well for a certain type of shareholder. For the small balance real estate investor, to whom timing is everything, such regulations are undesirable.
In all facets of business, more decision making entities translates to slower movement. This is why it is in the best interest of small private equity lending businesses to take on as few funding investors as necessary to maintain nimble decisive action and adequate liquidity for the creation new loans at a moments notice. This allows them to service the aforementioned borrowing commercial investors in an amicable way. To sum it up, it’s not bypassing credit that creates the market for private lending, it’s bypassing the albatross of bureaucracy.
My feelings on the subject,
Nathaniel S. Fulford VI