Bridging the Gap — Private Lenders Fill the Void as Banks Restrict Financing  

July 27, 2023 | General

Authored by Brenda Gordon, General Counsel at GoDocs

In today’s rapidly evolving private lending industry, a significant shift is occurring as traditional banks tighten their lending requirements. This shift presents a unique opportunity for private lenders to expand their presence and gain market share by filling the gap left by the restrictive policies of banks.

Private Lenders Solve Market Challenges

As borrowers face increasing challenges in obtaining loans from traditional sources, private lenders step in to bridge the lending divide. By offering more flexible lending options and creative solutions, private lenders are meeting the growing demands of borrowers while remaining competitive in a tightening environment. This expanded market, once dominated by banks, now provides an opportune environment for private lenders to establish efficient automation workflows to meet the demands of borrowers seeking financing. However, to seize this opportunity, private lenders must demonstrate their ability to meet the needs and requirements traditionally associated with bank loans.

In this dynamic and transformative landscape, private lenders are not only adapting to market shifts but also actively shaping the industry’s future. They are leveraging their agility, creativity, and customer-centric approach to meet the evolving needs of borrowers and establish a strong foothold in the ever-changing private lending arena. 

Conquering New Markets and Expanding Loan Products to Meet Market Demands  

To seize this once-in-a-generation opportunity, private lenders need to address the shortcomings of first-generation loan document automation solutions. As the private lending landscape evolves, lenders are facing the pressing need to expand into new geographical territories. Some lenders are ambitiously targeting all 50 states, a vast expansion that was not previously within their reach. This expansion, however, should not be perceived as a daunting project but rather an achievable endeavor with the right tools and resources. 

Simultaneously, the shifting market dynamics left by banks necessitate private lenders to broaden their loan product offerings to fulfill the demands previously met by traditional institutions. Private lenders now find themselves venturing into new loan products and sectors they hadn’t explored extensively before. This includes ground-up construction financing, bridge loans, single-family rentals, vacation rentals, and larger multifamily properties ranging from 5 to 50 units or even larger portfolios. 

To successfully navigate this transformative landscape, private lenders are encouraged to adopt next-generation workflows that encompass automation solutions with robust functionalities. These types of platforms provide the necessary tools for the flexibility, scalability, and integration capabilities required to support lender transformation. Such solutions empower lenders to confidently diversify their service offerings, accommodating the increasing demands of borrowers in these previously untapped sectors. 

By embracing automation solutions, private lenders can streamline their operations, mitigate complexities, and position themselves as market leaders in a rapidly changing industry. The convergence of geographic expansion and diversified services is a powerful catalyst for private lenders to solidify their position and capitalize on the unprecedented opportunities presented by this market shift. Embracing next-generation workflows allows lenders to optimize their processes and unlock the full potential of these transformative changes. 

Private Lender Essentials: Addressing 7 Critical Questions for the Next-Gen Loan Document Automation Workflow 

In the dynamic and ever-evolving landscape of the private lending industry, it is paramount for private lenders to continually assess and adapt their strategies to thrive in the face of change. With the shift, private lenders are presented with both challenges and opportunities that can shape their success and market share. By delving into seven critical questions and finding effective solutions, private lenders can position themselves for success in the competitive marketplace, ensuring they remain at the forefront of the industry. 

Implementing next-gen loan document automation operations enables private lenders to fulfill their ambitions of becoming industry leaders. By staying ahead of the curve and adopting innovative processes, they can differentiate themselves from competitors, attract new customers, and expand their reach. Moreover, efficient operations and reduced costs contribute to higher profitability, while faster loan document development and enhanced customer satisfaction lead to more referrals and repeat business. 

Timing is crucial for private lenders. Acting swiftly allows them to seize the opportunities presented by market shifts and outperform competitors. By taking prompt action, private lenders can position themselves as frontrunners in the industry, attracting top talent, strategic partnerships, and further growth opportunities. Delaying implementation risks missed chances and falling behind industry trends, ultimately hindering their ability to stay competitive and achieve their goals. By embracing strategic timing, private lenders can not only seize opportunities but also build a more robust capital structure, enhancing their financial foundation and setting the stage for long-term success in the dynamic private lending landscape. 

By thoroughly examining and answering these questions, private lenders can gain valuable insights and take informed actions to propel their businesses forward. 

1. What is the cost and time to build accurate loan  documents for new states? 

2. What are the cost and time considerations for building loan documents tailored to multi-family loans (5-50 units)? 

3. What are the costs associated with managing document compliance across all states and loan products? 

4. What are the costs and implementation considerations for building digital workflows that seamlessly integrate document automation with Loan Origination Systems (LOS) and Servicing platforms? 

5. What are the costs associated with ordering and quality controlling loans at scale with a high level of accuracy (e.g., 500, 1000, 2000 loans per month)? 

6. Are security measures and best practices in place to safeguard loan values of different magnitudes, such as $5M, $10M, $25M? 

7. Are external legal services available in all states, and what is the associated cost to obtain necessary legal documentation? 

Private Lenders Thrive with Agility and Adaptability  

Addressing these questions allows private lenders to navigate the shifting landscape with agility and adaptability. By understanding the cost and time considerations associated with accurate loan document creation for new states and tailored multi-family loans, lenders can expand their geographic reach and diversify their loan products to fulfill market demands. Effective management of document compliance, integration with loan origination and servicing platforms, and robust security measures ensure that private lenders can operate at scale and safeguard loan values across various magnitudes. Additionally, the availability of external legal services in all states ensures the necessary legal documentation is obtained efficiently and effectively. 

Through a strategic focus on next-gen loan document automation workflows and a thorough understanding of the key considerations, private lenders can navigate the dynamic lending landscape, seize opportunities, and drive success in this ever-changing industry. 

Author Bio:

Brenda Gordon serves as General Counsel at GoDocs. GoDocs is an innovative leader in automated loan document generation, transforming the commercial lending process. With a fully cloud-based platform, GoDocs provides a flexible digital solution that makes commercial loans more cost-effective to document and faster to close, all while maintaining compliance in all 50 states. GoDocs is a Corporate Member of the NPLA.