What in the Sam Hill is a Private Lender Coalition?
Co-a-li-tion [Koh-uh-lish-uh n]
According to Dictionary.com a Coalition is a temporary alliance between persons, factions or states into one body or mass.
A Private Lender Coalition is when you assemble a group of potential private lenders so that when you need to borrow money on a project you have a ready pool to tap into instead of running around searching for someone to lend on a property.
I advocate creating a coalition for several good reasons:
- Having the money available when you need it.
- Different Lenders have different criteria and you need to mix and match them to meet your criteria
- According to the SEC you need to have a prior relationship with the private lender before you can offer them any securities.
There are a few more reasons than that but these are the most important ones.
Most people don’t understand that the main issue that gets people into trouble with the SEC is that they don’t have a prior business relationship to the lender. The State Department of Securities and the SEC have created most of the exemptions specifically around that one condition. They target and go after businesses that violate this in order to protect their constituents.
Matching the lender with the type of investment you are making. You would not want to place a private lender that wants monthly principal and interest payments on a house that you are going to Flip. Ideally you would want a lender that is looking for compound interest with no payments until the project is complete. Otherwise you may put yourself in a precarious situation that will not work for you or your business.
Many potential private lenders are looking to get and have their money working for them as quickly as they can. They also are looking for a good interest rate and having their money secured by either the government or real estate.
Because this is their goal they will not necessarily wait around for you to have an investment opportunity. They will balance the time they need to wait with their other opportunities. They may decide that the best thing for them to do is to put their money in another investment that they may not be able to liquidate to invest with you.
The moral of the story is that you need to get their money working quickly and keep it working so that it meets their goals. This is why you need to create a coalition of as many investors as you can. But keep in mind that some states place limits on how many lenders or investors you can have.
For more information watch the third video about “Keeping it Legal” on www.crackingthevault.com.
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