How would a startup bridge lender get access to warehouse line or repo?

Hi, 

I've been working in the debt/equity brokerage space, looking to become a direct lender to increase my earnings and flexibility on deals. 

How is a bridge lender able to gain access to a warehouse line or repo

Thanks

 

Not to be an ahole, but you’re asking a pretty basic question that even an institutional debt/equity broker would have the answer to or at least could figure out a starting point. With that said, you’re going to have an uphill battle trying to get a line.

As was mentioned you’re going to need to have a track record of successful deals which takes time. Then you can approach banks, investment managers, etc....they all do this. 

In the meantime, family, friend and high net worths are your best bet.

 

^I have to agree with the above, it's like the joke "if you have to ask, you can't afford it".... I think you would need someone/some entity with serious capital to pledge as collateral and/or offer letter of credit to get a warehouse line. 

An alternative (much easier strategy), would be to start as a correspondent/direct conduit lender to a single source or small set (like a hedge fund or UHNW). You would still act as originator/underwriter/etc. but close in the name of entity or fund simultaneously. I would think a bank/warehouse lender want to see the established business as well as the backing of capital and credit.  

 

Located in the NYC area. I'm brokering deals in major metropolitan areas across the US, primarily MIA/ATL/LA/HOU. 

Deal structure is usually small balance bridge/construction loans on retail, multifamily, and mixed-use assets ($500k - $15 million).

The people above are stating that I should know how to become a direct lender, but they're missing my point. My business is establishing the relationship with the borrower, performing extremely minor underwriting, and sending the package to the actual lender/investor.

My expertise isn't derived from knowing the fundamentals on how the lender was able to raise their capital. I understand their basic structures, like if it's a debt fund, warehouse line, correspondent, or HNW investor but I don't know the intricate details of the capital cultivation, for example how to obtain a warehouse line. 

Hopefully that makes sense. 

 
Most Helpful

It's a revolving line of credit from a bank/financial institution (can be non-bank lender) typically with a low, but floating rate that mortgage lenders/bankers can use to fund loans they originate but intend to resell. I.e. it allows them to massively leverage their own capital in terms of lending capacity as the loans themselves are collateral and secured by agreement to the warehouse lender. The 'warehouse' term is equating the purpose of the credit line to that of a manufacturer/retailer... i.e. it finances the "inventory" (loans originated) in the "warehouse" (lender's balance sheet) until they are sold for a profit (i.e. on secondary market or to conduit or other buyer). 

Mortgage lenders/bankers can also make profit by "floating" for months or even years, meaning the warehouse line is a short-term rate (so could be like 1.5%) and the loans originated are long-term rates (like 3.5% for example), thus they can "hold" and earn a 1% spread profit on the interest collected vs. paid. This is very risky as rate moves can "twist" it the other direction and the value of the loans fall causing capital calls. So, this is a very risky form of long-term financing of a loan portfolio (but firms do it as very profitable when it works)! 

 

Great explanation. Our warehouse line is a permanent facility and we carry (at least a meaningful portion of) our loans on our books.

Typically we get anywhere from 40% back leverage (most asset classes) to 60% back leverage (multi family) on our originated senior mortgages. We get 0% leverage on hospitality - the bank refuses to touch it.

The one point I’d disagree with is risk level. Totally depends on the deal, asset class, sponsor, etc. There are some loans we do all equity (no back leverage) because our committee deems them too high-risk.

 

Saepe asperiores aut officiis deserunt. Nulla aut aut voluptatum sit. Optio et laboriosam aspernatur dolor ut itaque sit.

Quia ad asperiores dolores voluptatem repellendus. Sit quo eius recusandae suscipit aut pariatur. Quia tenetur dolor omnis perferendis. Modi excepturi laborum sunt illum. Ut iste et sit fugiat aut. Consectetur quae minus voluptate doloremque quo.

Quia culpa alias aut vel dolor. Sint necessitatibus ab quam qui. Unde atque est quis optio. In nesciunt est quia consequatur eius laudantium praesentium velit. Et tenetur occaecati animi et qui sapiente molestiae.

Libero magni ipsam tempore saepe doloribus ut. Repudiandae quam ratione eum rem minima fuga quo. Saepe voluptatibus veniam eveniet vel laboriosam et. Eos non accusamus voluptatem et optio. Accusamus ea quis ut aut reiciendis. Suscipit libero quisquam voluptatem ex aliquam repudiandae.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Secyh62's picture
Secyh62
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
kanon's picture
kanon
98.9
6
DrApeman's picture
DrApeman
98.9
7
GameTheory's picture
GameTheory
98.9
8
CompBanker's picture
CompBanker
98.9
9
dosk17's picture
dosk17
98.9
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”