Lender looking to expand Note on Note financing
I’ve done a few NoN deals before. I know this can be some what if a complicated/niche product, but was wondering if anyone had any recommendations on how to expand my loan portfolio to expand more into NoN. I work for a decent size financial institution and they are willing to lend more NoN.
Expanding into Note-on-Note (NoN) financing can indeed be a niche but lucrative area. Based on the most helpful WSO content, here are some actionable steps to consider:
Target the Right Borrowers: Focus on identifying borrowers who are active in acquiring or holding loan portfolios. These could include private equity firms, real estate investors, or specialty finance companies. Understanding their needs and structuring your NoN financing to align with their strategies can help you stand out.
Leverage Relationships: Build relationships with originators or brokers who specialize in loan sales. They can be a valuable source of deal flow and help you identify opportunities for NoN financing.
Refinance Workout Loans: As mentioned in WSO threads, refinancing loans in workout situations with commercial banks can be a good entry point. This allows you to step in where traditional lenders might be pulling back.
Conservative Underwriting Standards: Ensure your underwriting standards are robust. NoN financing can carry unique risks, so maintaining a conservative approach will help protect your portfolio while still allowing for growth.
Educate Your Team: If your institution is willing to lend more in this space, ensure your team is well-versed in the nuances of NoN financing. Training on structuring, risk assessment, and market trends will be crucial.
Monitor Market Trends: Keep an eye on sectors where NoN financing is gaining traction, such as real estate or specialty finance. This will help you identify emerging opportunities and position your institution accordingly.
Diversify Your Portfolio: While expanding into NoN financing, ensure you maintain a diversified loan portfolio to mitigate risks associated with this niche product.
Network in the Industry: Attend industry events, join forums, and engage with professionals in the NoN financing space. This can provide insights into best practices and help you stay ahead of the curve.
If you're looking for more detailed insights or resources, consider exploring WSO threads or publications on leveraged lending and specialty finance.
Sources: Q&A: Non-Bank Commercial Lending, Alternative Lenders & the End of Risk Taking for Banks - Opportunity or Risk?, Just So You Guys Know..., So you want to work in CRE Debt? Here are the options..., https://www.wallstreetoasis.com/forum/real-estate/state-of-the-cre-debt-markets?customgpt=1
Probably best to establish relationships with brokers who specialize in note on note.
What do you mean by note on note? Do you mean loan on loan (back leverage from a warehouse team / bank)?
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