Small is Beautiful - Micro Loans

We recently closed a loan many brokers would scoff at. Sure, it was for only 30-thousand dollars, but it was a beautiful thing. Why?

Well, for one thing it was an incredible deal, the borrower was able to purchase an ENTIRE two story building commercial building for that price, and it was a nice one too! Wow, the deals out there to be found by buyers seem to be getting better and better. After the deal closed, he expressed his sincere appreciation. He said that because the loan amount was so low, he thought no one would take him seriously.

It was a beautiful thing because the investor who put up the money - well, he was more than happy to have first lien position of a great building which is sure to appraise for a couple hundred thousand more than what he loaned against it. It was such an obviously good bargain, he didn't even require an appraisal. And the investor is earning a very nice return on his money! Six months interest, collected up front, isn't a bad thing, either.

It was also a beautiful thing, because from inception to close, the deal only took a couple weeks to close, despite the fact that a new LLC had to be formed to hold the real estate, etc.

What is also neat, is the fact that when this borrower performs on this loan, and makes a clean exit, he will be elevated to an internal thing we do with proven borrowers - he gets "preferred status", meaning his chances of getting a new loan services are much improved, and it will likely mean lower interest rates and fees, because he will have proven himself a good borrower, which is all a good investor really needs. The same investor may even fund the same borrower again and again, because he knows the borrower will fulfill his obligations.

I personally love deals like this, for many reasons, but probably most because it is the kind of transaction that we cut our teeth on; if it wasn't for the very first small private commercial loan we made not long ago, which I think was for about 130K, which literally "saved the farm" for a hardworking Wisconsin Dairy Farmer, White Knight may never have gotten it's start.