Private Lending - How to Pitch Your Deal

[Michael Manchester]

Truly private, business purpose lending, is really very different from conventional and non-qm. What a lot of investors, and unfortunately loan officers and brokers don't really understand is how subjective private lending is. Private lenders have zero obligation to fund your deal, even if it seemingly fits every program guideline. I've seen deals killed just because earlier in the week a few loans defaulted in the same general metro area. Underwriters are paid to condition loans, and they are going to do so. That's why it's so important to take a little more time with your loan officer or broker up front and make sure they truly understand the benefits and risks of your deal. 

Before a deal ever gets submitted, or you are even issued terms, a good broker or loan officer(LO) will have spent time getting to know YOU and YOUR BUSINESS. You should spend some time discussing experience, making sure the properties on your track record will be counted. If a LO/Broker hasn't bother to take the five or ten minutes it takes to discuss their experience requirements and go over your track record with you - he has no idea what kind of terms you will really get. Instead they show you the best possible terms their shop is ever going to close a loan at - get you in their pipeline - and then the pencil whipping starts. That is why so many investors are jaded on private lending - because they get lied to all the time. 

If your LO or broker does not take time to go over your recent projects, business structure and goals and personal experience then you need to understand that the quote they give you isn't worth the paper it's written on. 

Same for the individual deal. They need to know why you like the deal, how you sourced it, what kind of work is actually going to be done, what your estimated timelines for completion and sale are. Five extra minutes on the front can save your entire deal on the back. 

Why?

First, it makes sure that your quote is as accurate as possible. The LO/broker has taken the time to identify and notify you of any particular points that could cause friction during loan processing. Secondly, when the underwriter pushes back and tries to kill your deal (and they always do) your LO or broker can clear up any confusion and properly fight for your deal. If they don't have answers to the questions on hand, the credit team will become even more wary of closing the deal because it becomes clear your representative to the lender doesn't have the first clue about who you are or what you are actually trying to accomplish. 

If your lender has asked less than a dozen questions before giving you a quote - consider finding a true professional who takes the time to get to know you and whether or not you are truly a good fit for what they do. It will save you hours of time and needless stress. 

[Robin Simon]

Quote from @Michael Manchester:

Truly private, business purpose lending, is really very different from conventional and non-qm. What a lot of investors, and unfortunately loan officers and brokers don't really understand is how subjective private lending is. Private lenders have zero obligation to fund your deal, even if it seemingly fits every program guideline. I've seen deals killed just because earlier in the week a few loans defaulted in the same general metro area. Underwriters are paid to condition loans, and they are going to do so. That's why it's so important to take a little more time with your loan officer or broker up front and make sure they truly understand the benefits and risks of your deal. 

Before a deal ever gets submitted, or you are even issued terms, a good broker or loan officer(LO) will have spent time getting to know YOU and YOUR BUSINESS. You should spend some time discussing experience, making sure the properties on your track record will be counted. If a LO/Broker hasn't bother to take the five or ten minutes it takes to discuss their experience requirements and go over your track record with you - he has no idea what kind of terms you will really get. Instead they show you the best possible terms their shop is ever going to close a loan at - get you in their pipeline - and then the pencil whipping starts. That is why so many investors are jaded on private lending - because they get lied to all the time. 

If your LO or broker does not take time to go over your recent projects, business structure and goals and personal experience then you need to understand that the quote they give you isn't worth the paper it's written on. 

Same for the individual deal. They need to know why you like the deal, how you sourced it, what kind of work is actually going to be done, what your estimated timelines for completion and sale are. Five extra minutes on the front can save your entire deal on the back. 

Why?

First, it makes sure that your quote is as accurate as possible. The LO/broker has taken the time to identify and notify you of any particular points that could cause friction during loan processing. Secondly, when the underwriter pushes back and tries to kill your deal (and they always do) your LO or broker can clear up any confusion and properly fight for your deal. If they don't have answers to the questions on hand, the credit team will become even more wary of closing the deal because it becomes clear your representative to the lender doesn't have the first clue about who you are or what you are actually trying to accomplish. 

If your lender has asked less than a dozen questions before giving you a quote - consider finding a true professional who takes the time to get to know you and whether or not you are truly a good fit for what they do. It will save you hours of time and needless stress. 

Its a pity that "private lenders" and "private money" is still so linguistically tied together (and I have long wished BP would help differentiate and categorize this). I would say this is true for sure on true "private money" individuals or very small hard money shops, but "private lenders" that specialize in DSCR, RTL, GUC etc. and are nationwide are much much closer to traditional mortgage lenders and real operating enterprises that arent that subjective anymore. Very different animals