While the pace of technological development has only accelerated in the last few decades, there’s at least one profession that hasn’t changed much – and it’s one of the oldest professions in the world. Over millennia, the fundamentals of commercial money lending have remained static – not for lack of demand, but perhaps, for lack of technology.
As the Co-Founder and President of opens in a new windowNovello, I come from the traditional real estate world, with three decades of experience as an equity investor and Managing Principal in commercial real estate. I spent my career repositioning transitional assets through development, construction, renovation and lease up. Time and time again, I saw that financial products built for small-balance CRE investors are scarce and inflexible. Such CRE borrowers are a seriously under-served segment, often forced to accept sub-optimal terms to secure time-sensitive financing.
CRE investors look to take a bridge loan in several scenarios. To start, they may have an opportunity or need to refinance, purchase, or renovate a property. The property type can be anything from multifamily buildings, self-storage facilities, office space, light industrial, retail, manufactured housing, and more. What do they all have in common? The need to access a reliable source of immediate financing that is malleable and will allow them to close their deal. This financing is typically short-term, up to 36 months, by which time they will be able to secure their permanent commercial mortgage.
For small-balance bridge loans, many larger or institutional lenders simply won’t be interested. On the other hand, if a private lender doesn’t specialize in bridge financing, they may not have the terms to offer that make sense for the CRE investor’s business plan. Besides that, there are many different costs of capital associated with applying for several different bridge loans. Finally, investors need their lenders to move as fast as their deals do.
While the first set of challenges can be addressed by a focus on customer experience, the dual challenges of speed and the cost are perfect candidates for disruption by technological means.
My co-founder and Novello’s CEO, Omer Haim, is an accomplished business operations executive in financial technology, adtech, and startups with a focus on lending products. Having built customer-centric solutions, he knows the value of an excellent customer experience firsthand. But as he always says, “Even the greatest experience or product is meaningless if its intended users can’t find it.”
Wouldn’t it be nice if technology could help investors discover the right lenders, then speed up everything from the application to the required documentation, all the way through to approval and loan origination? It would certainly save valuable time if someone were to reimagine the process of getting a CRE bridge loan.
To start, advertising technology could be used by lenders to help put the right services in front of the right people at the right time. The lender’s costs could be kept down by focusing only on appropriate leads, and they could even pass on those savings.
Then, the myriad web development tools out there could be put to work to create a user-friendly experience on bridge lenders’ websites, and to provide immediate access to short applications that pre-approve borrowers instantly. This would mean going beyond digitizing paperwork – it would also mean an overhaul of the process to remove unnecessary, time-consuming steps.
Of course, this approach would have to be carried through to every step of the flow, from underwriting risk to approving applications and originating loans. All of this to save borrowers on critical time and bring down costs when they’re seeking bridge financing.
Wouldn’t that be nice? We thought so, too.
Today, Novello is focused on shorter-term, smaller-balance, CRE asset-based needs. As a balance-sheet lender making heavy use of technology, we’re able to close as fast as borrowers need to capture rapidly progressing deals. We finance deals nationwide*, and create a deal structure personalized to each borrower’s unique scenario. We selected Geraci as Novello’s outside counsel since they fit our needs like a custom-made glove, and they share our sentiments about how processes should be structured to save people time and provide them with a great experience at every touchpoint.
For tomorrow, Novello is developing additional financial technology products to serve the business needs of the lending industry. We believe that business – like life – is about being in the right place at the right time. If you do your part, you can make your own good fortune. With our technology portfolio, we position ourselves to be in the right place at the right time for our partners, and we’re able to align our interests to create a better shared future. After all, isn’t it time that this profession got a technological upgrade?
*Except CA, AZ & Nevada