Loan sponsor/guarantor for a syndication

12 Replies

Loan sponsor question - where can one be found?

The quick answer that comes to mind is to network through local RE events and conferences, etc...however, how did some of the more seasoned investors find success with this early on in their RE ventures?

Thanks!

Lenders look for highest return, lowest risk when placing money. What can you do to get them what they want? Experience, track record, money into the project, etc. is the answer. Aside from that you have to find the lenders willing to take that risk, and that comes from relationships. 

Originally posted by @Karen Margrave :

Lenders look for highest return, lowest risk when placing money. What can you do to get them what they want? Experience, track record, money into the project, etc. is the answer. Aside from that you have to find the lenders willing to take that risk, and that comes from relationships. 

 @Karen Margrave

Thank you Karen. I agree with what you have stated, although when you say lender are you referring to say a Wells Fargo, or Arbor? I was more thinking of someone who I can attach to a loan for a .5 - 3% sponsor fee...however I suppose your advice works for both.

More so, I am asking what is the best way to find people looking to be sponsors?

Thanks,

I have never participated in any type of syndication. I was giving you general information on what anyone that is lending money is looking for. As to a sponsor, I would think they would want the same things in regard to a track record, experience, etc. Also I neglected to mention the attractiveness of the deal you're proposing has a great deal to do with interest. Good luck. Maybe @Brian Burke the king of syndication can weigh in. 

Thanks for the shout-out @Karen Margrave@Jared Carpenter you would probably find that right here on BP, maybe someone willing to do it will chime in here or send you a PM.  Otherwise, it would most likely be from your circle of friends/colleagues/family.  The thing is, the loan guarantor (that's what it is, not a "sponsor"--that's a word used to wash clean what this really is--a guarantee) is taking on a lot of risk.  If you fly the nest with all of the company cash, the guarantor is on the hook.  If you commit fraud in obtaining the loan, the guarantor is on the hook.  If you file bankruptcy on the entity, the loan can turn full recourse to the guarantor.  So needless to say, the guarantor needs to have a certain level of trust that you won't do those things.  Trust is earned, not advertised for.

If you are wondering how I did it when I was getting started, here's an answer you won't want to hear.  I have been my own guarantor on everything I've borrowed on the entire half a billion dollars in real estate that I've bought.  I never "hired out" the guarantor function (nor do I act as guarantor for anyone else's deal--for me there's more downside than upside).  Instead, I started small--with single-family houses (for which I could qualify for financing with what little I had to my name back then).  Then, over time, as my balance sheet and reserves grew, I increased the size of my acquisitions.  It took me two decades to be buying $20+ million properties.

Certainly you can do it faster than I did.  One of the ways is to do as you suggested--finding a loan guarantor to put up their balance sheet and name--someone who trusts you enough to sign on the dotted line when you can't.  Depending on your own balance sheet and track record, that might be fairly easy, or completely impossible, or somewhere in between.

Originally posted by @Jared Carpenter :

Loan sponsor question - where can one be found?

The quick answer that comes to mind is to network through local RE events and conferences, etc...however, how did some of the more seasoned investors find success with this early on in their RE ventures?

Thanks!

Commercial loan brokers will know people that will do this for you. In answer to your question about getting started it was all me until my company was strong enough to be the guarantor.

I have been to guarantor on all of my deals so far, but am not opposed to bringing in a KP to sign on the loan with me if needed. 

I think it's all about building relationships and trust. Not sure there is a much better way. 

@Jared Carpenter you're using or mentioned the best sources out.  Seminars and conferences are great ways to find a guarantor or perhaps what you need is a co-sponsor.  Co-sponsors will typically require a larger share of the deals but they also provide more benefits to the acquisitions and asset management process.  It can take time but eventually you'll find a potential partner but then the question will be "is it the right partner".