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Commercial Loans: Choosing a Repayment Structure that Fits the Deal

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Lots of commercial lenders have a style they like to use when setting up their loans.  For lenders that might be considering a deal, and want to tailor the financing to match the situation, here are some examples of how commercial loans are often structured to match the situation.
Interest rates Increasing Rates – Example: every year the interest goes up one percent - interest is at 5% the first year, 6% the second year, and 7% the third year.Sometimes the interest might jump from 8% to 13% after a year, and then 14% after another year, etc.
Why might you do this?If the deal is expected to take a set period of time, financing costs are lower if the deal happens on schedule.Interest rate hikes can add pressure conclude a deal expeditiously if the cost of delay will be higher.If you want to be out of a deal by a certain date, it can add incentive for a borrower to seek alternative funding once they’ve completed their initial startup and will have access to better terms.The rate increas…

I’m in charge here.

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How a borrower perceives you is the key to where you rank in their priorities.  With a little practice, you can perfect a persona so your borrowers will keep payments to you at the very top of their priorities.
Many of the articles on this blog talk about the math or the rules of lending.This time, I want to get a little deeper into purposefully posturing yourself in your relationship with your borrowers.I’m going to lean on the ideas I read in the early 2000s from the book Winning Through Intimidation.It’s an amazing book about how the author, Robert Ringer, was tricked repeatedly by big money investors and real estate developers as he refined his ability to make himself central to the deals he was brokering.His story takes us along as he transitioned from repeated, painful commissiondectomies to impressing his clients with aerial tours in his private Learjet.
He discovered that surviving in the cutthroat business of high-dollar commercial real estate required him to become the very…

My friend wants to borrow some money, what do I do?

How to loan some money without losing a friend.

First, are you sure it’s not a gift? If your friend doesn’t have the income to support their regular bills plus the payments on your loan, you might end up unwittingly giving them your money.If your friend might have an interruption to their income, your loan is probably the last thing on their priority list.
Is this person a friend you want to hang out with from time to time? Once you’ve loaned out your money, the debt is going to hang over your relationship until it is repaid.If there are problems during repayment, or you have to take steps to ensure collection on your loan, your friendship will probably never be the same again.
Are you headed down a slippery slope? Once you fund your friend with cash, are they going to come back and ask for more.You might become their new favorite bank if they can make withdrawals from you.Are they going to tell your other friends?Will they spur the great exodus of friends from your life as you end u…

Businesses Increasingly Adopting Moneylender

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Our loan software is finding a steadily growing place in core business accounting.Small and medium businesses are finding all the tools they need to handle their loans, and enterprises are even stepping in to apply Moneylender to their huge volumes of loans.Moneylender doesn’t care if a loan is $1 or $1B, it just does the math, but for the creators of Moneylender it is a gratifying statement of public approval that billions of dollars are flowing into and out of the software.
...a versatile software system that can handle enterprise-grade volumes of data...
Moneylender has always been useful to small businesses and larger businesses that have a manageable amount of loan data.In its early days, Moneylender didn’t have the tools and workflows that would make it a viable system for large businesses, businesses that make dozens of new loans every day, or businesses with tens of thousands of loans.That humble past has given way through constant enhancement, extension, and revision to a ver…

Making Unsecured Loans for (Reasonably) Safe Profit

I had a phone call with a potential customer the other day.They were looking for some software to manage their loans as they start a relatively new lending business.After finding out more about the type of loans they planned to make, the typical amounts, repayment timelines, etc. I confirmed that Moneylender Professional would be more than adequate to handle the task.  Our conversation moved onto the business of making loans well.
This lender asked how to make sure the loans get repaid when the debt is unsecured.How do you decide who will get your money to make sure that you always get paid back?We talked about it for quite some time, and we came up with a few key ideas to answer this question.
Is the need for the loan prudent? First, is the borrower trying to pay routine bills, or is the loan for something unexpected and urgent?If the borrower is just restructuring debt, that’s probably a job left for banks or credit cards.Paying utilities or rent?These are signs the borrower isn’t …

Get Organized with Loan Servicing Software

Many people end up with a loan and think that it’s totally manageable to do the math themselves and keep track of it all in Excel.For a while, things are going pretty smoothly.Annual tax season comes around and the crunch to figure out what numbers to report to the IRS and your borrower, and after a little digging, we get some numbers that look right.For a time, things are great.
Then the borrower want’s a payoff quote, or needs to show a recent statement to someone, or they start missing payments and catching up, or the late fees are getting lost because there isn’t an easy way to stay on top of them.The numbers for the IRS are harder to dig up.Maybe the borrower files bankruptcy and the court needs detailed documentation, or you have to foreclose and more documentation is required.Maybe there’s a dispute, or an adjustment, or some other change that starts to break the consistency of the formulas in Excel.
That’s when you need loan servicing software.Good loan servicing software wil…

Big Thanks to Mike Ruscica and NoteConference.com

I want to share some info about my friend and advocate, Mike Ruscica.Mike is an investor and investment coach from New Jersey that dedicates his time teaching others how to invest in notes.I’ve seen firsthand how his techniques have generated tremendous returns.Several years back, Mike was chatting with a mutual friend and mentioned he was using a certain software to track his loans. Our friend suggested he give Moneylender Professional a try.Mike made the switch to Moneylender and has been referring his people to my loan servicing software ever since.
I got to know Mike over the years as he would occasionally call with questions about how to set up various scenarios in Moneylender.Mike runs a week-long conference called NoteVision where he has presenters covering all kinds investment topics.I tricked him into letting me present the soon-to-be-released Alpha version of Moneylender 3 at his conference in 2017, and that was the first time I ever met a Moneylender customer face-to-face.…