Showing posts from November, 2019

Making Money in a Shaky Economy

The last four months have seen a steep downturn in sales of Moneylender.  I asked my bank how business has been lately, and they noticed their branches were oddly silent in August.  Many of my fellow business owners described an eerie quiet lately.  This is by no means conclusive proof of an economic slowdown, but I did review some government metrics that are showing those signs. In the mid 00’s, defaulting mortgages put a quick end to the easy-to-get mortgages for underqualified borrowers from previous years.   Slowing home sales eventually pulled down the global economy.   Moneylender sales seemed a bellwether, as sales slumped dramatically from 2006 to 2009.   While the lending market languished, so did Moneylender. While many industries stuttered and shrunk, I saw other industries flourish in a way that sparked my imagination.   As foreclosures soared, drive-by appraisers went into action.   The rental market took up some of the slack in housing demand.   Services that

Stacking the Pennies Perfectly, Avoiding These Common Pitfalls

I often talk with customers that are dealing with the headaches of trying to account for thousands of loans, often with a team of people each having different responsibilities, and quite a bit of confusion can arise when trying to implement and operate a new system to do the complex accounting demanded by loans.  I’ve summed up some of the pitfalls I’ve seen people fall into time and again, along with the path you should walk to avoid endless confusion and accounting headaches. Problem: Not relying on the accuracy and accountability of Moneylender’s systems. You start using Moneylender, but you don’t trust that Moneylender is doing what you want.   Perhaps you were managing your loans in Excel and input every number by hand.  Losing that familiarity with every single penny feels wrong, like your loans are out of control.   Perhaps you have a strong accounting background, and you want to apply the principals of standard business bookkeeping to the loans as an aggregate

Commercial Loans: Choosing a Repayment Structure that Fits the Deal

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 b

I’m in charge here.

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