Phil Grossfield's Blog


Remembering 911; Second/Junior Lien Positions

Remembering 911

My Schedule…and A Little Extra:  I was the first one to the office which was typical. I turned on my computer and realized instantly that something was wrong. I turned on the TV and literally thought to myself, “is it April Fool’s Day? No. Oh my G-d!” I ran to the conference room where we had a much bigger TV and flipped the switch…slowly I backed away and instinctively found a seat…eyes and mouth wide open…  The next office dweller dashed in and said, “did you hear…”. “Yes,” I interrupted, “I have it on the TV.”  He sat down in slow motion, and we watched in silence. One by one the employees of our small business walked in and slowly sat down…as the first one to see what was happening that morning I filled them in, blow by blow.  I’ll never forget the collective gasp when the first tower went down.

My best friend was on his cell phone the whole time trying to reach his brother who was in Manhattan…of course the cell lines were busy. When it was “done,” our CEO announced the work day was cancelled. He told us to go home, try to explain what happened to our kids and ourselves, and heal.  As I explain to my children, yes, there are really bad people out there and it’s impossible to even try and understand what goes through their heads. But there are more good people in the world…and we must challenge heartless, baseless hatred by being brave, thoughtful, and kind…listen to your gut and act from your heart. It was a confusing time…one of anger, sadness, and strong patriotism. Do you remember Whitney Houston’s performance of the Star Spangled Banner at Super Bowl XXV?  It makes me tear up every time I watch it.

My Schedule:  With the exception of Initial Review and Investment Committee meetings, and management meetings throughout the week, I’m generally available.  Just like you, I’m a busy guy thank goodness, and although I do my best to pick up the phone as much as possible and return emails quickly, sometimes it’s not advisable nor possible.  If you need me urgently, text me at (212) 271-8267.  And if you want to ensure we have a block of time together, schedule a meeting on my calendar using this appointment link. 

Junior Lien Positions on Real Estate Collateral

WBL makes loans to businesses and we use real estate as collateral for all of our loans. I’m often asked if we will take junior lien positions on the properties and the answer is YES. Although every lender wants to be in senior lien position, including WBL, we will take a junior lien position under most circumstances.  Here are some general guidelines to know regarding junior lien positions keeping in mind that every loan has it’s own nuances so we might expand or restrict the same.

  • Lien Position1With sufficient equity in a property, we will lend in junior lien position. In fact, we’ve been known to take a 3rd or 4th lien position!
  • We will go in junior lien position on residential properties, commercial properties, industrial properties, and even on specialty properties, but not on land.
  • If the senior lienholder is a private institution, as opposed to an institutional lender such as a bank, then going in a junior lien position can be problematic because private lenders add in all kinds of penalties and fees that eat up the equity in the property. In some cases, we will take out the senior lienholder by paying them off which is a good option because it allows us to lend to your Merchant Borrower, puts WBL in senior lien position, and increases the loan amount which increases your commission. 
  • If our loan amount is very small (skinny) compared to the senior lien, then we may require that the senior lien be paid down to bring it more proportional. For example, if the senior lien is $1m and our loan is just $100,000, then the lien ratio is 10 to 1.  In this example the economics don’t make sense for us should the Borrower default.  However, if we pay down the senior lien, say by $200,000, then the remaining senior lien goes down to $800,000 (from $1m) which means our loan goes up to $300,000 (from $100k).  Now our lien ratio is about 2½ to 1 ($800k/$300k) and now we’re in business!  We can look at these on a case-by-case basis.

That’s why it’s so important you ask every merchant whether they have real estate. ALWAYS ASK EVERY MERCHANT WHETHER THEY HAVE REAL ESTATE!  In fact, you should investigate whether merchants whom you’ve turned down or need more money have real estate.

Last Week:  Lower/No Payment Loans – Subsidies and Interest Reserves.

Resource Links, Process & Loan Intake Instructions

Appointment Link – Get On Phil’s Calendar.

White Label Marketing Flyers Using Your Logo & Contact Information.

Flyer For Independent Sales Organization – ISO — Phil Grossfield

To Qualify For A Business Loan(1) Equity in Real Estate – we’ll utilize virtually any type and combination of real estate in any condition, and (2) Revenues – sufficient to support/afford the loan payments.  If we have these two, we can overcome just about any hurdle…

Email the Loan Opportunity To Me.  Send me (1) an Application with all the Merchant/Borrower’s information including their mobile number and email address, (2) a full description of the real estate (download this Excel REO Schedule), and (3) a minimum 3-months business bank statements (6 months is better if you have it).

Process To Get Started.  After I send the loan opportunity to our Intake Department, they’ll send me feedback on the real estate collateral, affordability, and any other considerations. On the same day or next, I’ll present potential loan structures to our Market Clearance team for guidance. Then you and I will discuss and decide what to Offer your Merchant Borrower. If accepted, then we’ll send the an authorization form and formally submit the loan.

Always Ask Merchant/Borrower If They Have Real Estate – What Real Estate Will Be Acceptable As Collateral?

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