How are we compensated; we earn a success fee at closing of 1% to 5% of the funded amount, determined primarily by the loan size but also depending on the type of transaction and other factors.The initial work performed on any new account is always at our expense and involves an internal review and analysis of the loan request by our Financial Services Firm followed by further review with the specific lender selected.
The lender is selected on the basis of the borrowing company’s industry type, geographic location, loan size, credit profile, type and mix of collateral etc. The lender who is approached with the transaction must express a defined interest in providing a proposal based on the representations that have been made by the borrower before they will issue a terms letter.
Access to broker/dealer firms charge for their time and efforts. These costs are paid in the form of a retainer or hourly billing.
The majority of the Financing Services Firm generally require a REFUNDABLE retainer of $2,500 or above; but only after the borrower has received and agreed to proceed with the lenders specific terms. If the transaction proceeds to closing and closes the retainer is credited against the closing fees, The retainer is non-refundable if their are material misrepresentations or omissions by the borrower or the borrower fails to proceed with the financing.
There are circumstances when a retainer can be waived and when we say waived we mean we are willing to cover up to $10,000 in hard and soft cost for the borrower.
We are providing the borrower with a specific lender who can offer financing to them based on the lenders review of the representations made by the borrower with respect to loan size, geography, credit profile type and mix of collateral etc.The retainer paid by the borrower is an engagement fee to arrange for the specific financing. We work on a non-exclusive basis and you may choose to accept other financing or pursue other available financing options.
When our borrower misrepresents collateral or cash flow
We require the retainer to protect ourselves against situations where the borrower has inadvertently misrepresented the value of collateral or the cash flow to cover debt service. It would also protect us in a case where the lender finds they cannot perfect a security interest in the collateral being offered or the borrower cannot provide the necessary documentation that the lender requires.
Who are the Private Lenders or Where are the funds for your Transactions obtained?
Our Lenders are NON-BANK lenders located throughout the country that obtain their funds, not from deposits such as a bank but rather from the sale of notes and bonds on Wall Street and through private investors. They are, therefore, able to take on more risk and provide financing for tougher transactions that do not qualify for bank financing.
Pre Closing expenses are the responsibility of the borrower.
The purpose of due diligence is to allow the lender to confirm that the representations made by the borrower are true and correct so that they can close the loan.
All our lenders generally require the borrower to cover their costs of due diligence prior to loan closing. If lenders were to pay the due diligence costs they would often waste their money traveling to the borrowers company or property and performing appraisals and audits on situations where the results of that due diligence were such that the loan cannot be closed.
If the lender were willing to pay for the examination and investigation necessary to close the loan, borrowers who have problems might not disclose them in hopes that the lender would not discover these issues that may have previously caused the loan to be rejected.
Lenders due diligence may include a site inspection at your company focusing on your back office operations relative to the performance of your accounts receivable. Particularly they will want to examine the exact service or product provided, how you bill, to whom you are billing, the net collectible amount paid to you after allowances and deductions, any potential offsets due other parties or issues that could lead to offsets and the historical performance of your AR’s returns.
Real Estate, Equipment and Inventory appraisals that are more than 6 months old will likely need to be updated or in some cases may need to be redone.
Character of the borrower and the Company
The lender will also be concerned with the character of the borrower (both from a company perspective as well as from the principals perspective) as it relates to previous issues of fraud or bankruptcy etc. They will also need to clearly confirm the viability of the company going forward and any legal issues that might cause them to suffer a loss with respect to the loan to be consummated.
This could include the possible inability of the lender to obtain a first lien against the collateral or the borrower’s inability to cover debt service etc. The lender will be available to explain in detail what could cause them not to close the loan so that there are no surprises once you have agreed to their terms and conditions and before you pay for the due diligence.
How much time is required to Close?
The standard Time to close a transaction is 30 to 60 days
Bridge or Mezzanine Loans 7 to 21 days
All businesses proceeds on beliefs, or judgement of probabilities, and not certainties; Charles W Elliot