 An
interview with a Private Lender
It happens everyday. Well-prepared entrepreneurs are walking
into the banks with brilliant business ideas with well developed
business plans — and are walking out empty-handed. Many
of these professionals are ultimately able to obtain financing
from private lender, like Tom McKenzie through business capital
brokers.
For individuals who do not want to give up a certain percentage
ownership in the business as is often required by venture capitalist
and deal with the angel investors who may demand a board position
or significant day-to-day control, the private lender may be
an alternative worth considering.
On the whole private lenders are looking for the same information
and will conduct a similar due diligence as the banks to make
a positive funding decision. They are looking for great business
ideas, at the right time, with an airtight business plan, that
includes contingency scenarios and realistic forecasts, backed
by experienced and professional people with some financial stake
in the business. However, most private lenders are “specialists”
who engage in higher risk ventures because they clearly understand
both the opportunity and risk associated with selected business
types or market segments. Private lenders will not only fund
project the banks rejects, they will creatively structuring
loan repayment and sometimes be a helpful resource.
For example, Mr. McKenzie has a background in the automotive
market; accordingly he has funded projects such as automobile
dealerships, transportation and trucking businesses and manufacturing
for the automobile sector. While he does not have a professional
background in medicine, he has also developed an interest in
providing capital to medical practices because of the doctor
shortage and because doctors on the whole are responsible debtors.
Additionally, businesses like wineries are attractive because
they are high asset based and offer more security. He will also
provide funding in emergency and rescue situations.
When asked how he makes the decision to fund a project, Mr.
McKenzie laughs and said, “you do the best due diligence
you can and then it’s just like gambling at a slot machine.
You put your money in and take the risk and hope for the best.
Knowing that statistically some of the businesses will do well
and others will fail. You learn the most from failures.”
After twenty years of investing in both winners and losers he
has developed an evaluation methodology to help him select the
businesses with the highest probability to be profitable and
succeed long-term.
Given the relatively low profile of most private lenders, Mr.
McKenzie says that a significant number of the best projects
come to his attention via business capital brokers. “The
brokers screen the projects, giving me a wider selection of
projects that match my specific parameters”. Business
capital brokers will normally develop relationships with hundreds
or thousands of lenders and investors, so the key is to sell
the broker on your business plan and get him or her sufficiently
excited about your project to recommend it to the right lenders
or investors.
Lil Sawyer is Managing Director with FundingLinks Inc.,
a business capital broker company in Toronto that assists entrepreneurs
and businesses to secure capital worldwide. She can be reached
by email at lil@fundinglinks.com,
through the web site at www.fundinglinks.com
or by telephone (905) 427-9726.
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