history related to bank lending prac- tices, being liability averse has been an underlying factor in sustaining the need for other sources of lending. BANKS DO NOT LEND ONALL PHASES OF REAL ESTATE. Real estate development would not be possible without private lenders like Ignite Funding, and here is why. Historically, banks are most confi - dent in lending on construction, and sometimes they will dabble in devel- opment projects. According to Pat Vassar, Ignite Funding’s Director of Underwriting, “This leaves a gaping hole in the cycle of real estate devel- opment. A borrower cannot even think about beginning a construction project without first acquiring the property, getting the property enti- tled and zoned, and physically prep- ping the property for construction.” Property acquisition and horizontal development are essential steps in the process and can require a signif- icant amount of capital to complete these steps. This is why private lend- ing, including hard money lending by Ignite Funding, continues to play a pivotal role by bridging the gap left by traditional institutions. BANKSARE SLOWTO APPROVE BORROWERSAND FUND PROJECTS. One of the major hurdles that borrower’s face when seeking tra- ditional financing is that the banks’ underwriting process largely focuses on the borrower’s credit worthiness and credit history. This requires an onerous amount of paperwork and review of the borrower and the bor- rower’s company, even if they are a repeat borrower. This review process can take many months which can be
detrimental to a borrower’s project timeline regardless of the phase of development. For example, delays in funding can cause the borrower to face increased acquisition costs or a missed opportunity to purchase a property. It can also cause delays in horizontal development and/or vertical construction; which, depend- ing on what happens to the market during that time, can adversely affect a borrowers bottom-line and overall success as a company. At Ignite Funding, while our under- writing process includes a thorough review of the borrower to ensure that they are a financially sound compa - ny, our main focus is on the piece of property and the borrower’s intended exit strategy. The reason being, Mr. Vassar says, “Even the best borrower is only good until they are not. At the end of the day, your main source of recourse is going to be the property you take back through foreclosure and if you are able to execute the sale of the property as it was intended. This is what we call a “loan-to-own” mentality, which means that even if they are a repeat borrower, if we do not believe it would not be feasible for us to successfully manage and sell a property to recoup investor principal, we will not fund the loan.” Main- taining capital preservation for our investors is a major influence in Ignite Funding’s underwriting standards. BANKS CAN BE CAUTIOUS LENDERS TOAFAULT. Due to the banks variable loan portfolio, this leaves them suscepti- ble to any market fluctuations. This in turn makes banks apprehensive to taking on more liability during times of uncertainty, even with borrowers that participate in a market that is mostly unaffected. Banks will not
only retract in originating new loans, but they will also cut-off a borrower mid-development, even if the bor- rower is showing no signs of slow- ing-down in their success to turn- over their product. “We saw this happen last year [in 2020], with a couple of our long-term borrowers that typically rely on tradi- tional financing for construction. The borrower was already struggling to build fast enough to meet the demand of a hot market, and for no reason of their own the banks shut-off their line of credit mid-construction. That would have spelled disaster for the borrower if Ignite Funding was not able to step-in and inject the funds needed to continue construction,” says Mr. Vassar. In this situation, the cost of halting production and poten- tially not being able to complete the project at all, more than outweighed the cost of the hard money loan. Ignite Funding prides itself in its ability to continuously support the success of its borrowers, and in turn, provide quality investments to its investors. To date, Ignite Funding has facilitated 1,376 real estate invest- ments funded with $907 million in investor capital, providing 51 bor- rowers in 16 states with the ability to acquire and develop over 12,000 acres of land, 8,100 residential lots and 3.5 million square feet of com- mercial space. If you are interested in adding pas- sive double-digit returns collateral- ized by real property to your portfolio, give us a call at 702-761-0000 or text the word “Investments” to 844-552- 7022 to stay up to date on all avail- able investment opportunities! • Ignite Funding, LLC | 2140 E Pebble Road, Suite 160, Las Vegas, NV 89123 | P 702.739.9053 | T 877.739.9094 | F 702.922.6700 | NVMBL #311 | AZ CMB-0932150 | Money invested through a mortgage broker is not guaranteed to earn any interest and is not insured. Prior to investing, investors must be provided applicable disclosure documents.
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