Private lenders must be aware of the indicators that point to the need for additional personnel—whether you’re in the initial stages of building your business or trying to scale.

At some point in your private lending business, you will face the question of whether it’s the right time to hire additional employees. You’ll likely also have to figure out whether to keep certain business functions in-house or outsource them.

There is no definitive answer to these questions, but there are certainly key indicators private lenders can identify to determine when they should expand their team and what route will work best for their business. Let’s take a look at some of them.

Your First Few Hires

Private lenders who are just starting out may find it easy to operate efficiently with a very small operation. In most cases, a private lending business can start with a few key employees to get things off and running. At this stage, the important areas of the business to consider are operations and sales. Having an employee who can manage the creation and implementation of standard practices and procedures, provide daily oversight for the business, and work on long-term planning will be critical for the ongoing success of the business. Unless this individual is also savvy in accounting, including cash flow oversight, budgeting, and P&L maintenance, you’ll likely also need someone to assist with daily and long-term financial tasks.

On the sales side, having one or two great salespeople may be all you need. Try to hire salespeople who want to build their own books of business to reduce the need for ancillary marketing expenses early on. Your sales staff should be comfortable not only finding leads but also processing their own files. Although origination volume for your company is lower and just starting to grow, having sales personnel who are willing to take on responsibilities like document collection, processing, and prepping a file for underwriting is critical to get files to closing. Your point person on the operations side can do the final review of files before getting items ready for closing.

At this stage of your company, there are definite areas where outsourcing makes the most sense. For example, consider outsourcing all legal work through closing. You can pass on legal costs to the client, saving you additional expenses and employee overhead.

Loan servicing is another area to consider outsourcing. Numerous companies specialize in the private lending space.

Finally, if you need basic marketing services (e.g., social media and digital marketing campaigns), outsourcing to a marketing consultant or small firm specializing in working in the real estate or mortgage industry is likely your best bet. With regular check-ins to ensure you are accomplishing your goals, you can keep costs low while also enjoying professional marketing assistance.

Expansion Plans

As you look to expand your business, it’s important to think about your goals and the personnel necessary to achieve them. If your loan volume is increasing or you want to increase loan volume, for example, it is likely time to remove that workload from your sales and operations personnel.

First, you will need to invest in personnel to assist with loan processing and underwriting. Having dedicated processors allows your sales team to do what they do best—sell. They’ll be able to spend more time getting deals in the pipeline rather than worrying about every detail and document needed for a file. Loan processing times will be faster, meaning your company will be able to handle increased volume without the customer experience suffering. Hiring dedicated underwriters will also help free up your operations staff, allowing for a faster, more streamlined, and consistent origination process. Hiring in these two areas will give you increased capacity to handle more loans without overextending your staff.

As you begin hiring staff who serve more specific job functions, it’s also a good time to start considering technology solutions that create a more uniform process. You don’t necessarily need to hire developers and create your own software. Private lending software options now include access to a CRM, document management and storage, pipeline progress, and much more functionality. Choosing and implementing a good technology solution early can reduce the number of employees you’ll need as you grow.

If you are looking to grow your business by diversifying the types of loans you offer or by expanding your geographic footprint, it may be a good time to hire individuals specializing in treasury and capital markets as well as legal personnel well-versed in compliance and state-specific regulations. Hiring employees who are savvy at navigating and developing capital relationships and are able to analyze areas of opportunity and risk will likely be a more costly hire, but it’s crucial for your business. These employees will be able to identify product opportunities and also forge connections with capital providers that will allow you to offer those loan programs.

If you are expanding geographically, it’s important to either hire internal counsel who can navigate the intricacies of lending throughout the U.S. If you are already outsourcing most legal work, work with your existing law firm to ensure you have appropriate licensing when needed and are in compliance as you expand to new territories.

In any company expansion situation, marketing will be a big factor in your hiring decisions because marketing will supplement your sales team’s efforts to drive new business. Keep in mind that it’s very common for private lenders to handle some internal marketing as well as use outsourced consultants or agencies for certain functions. For instance, you could have a few internal marketing employees to help oversee overall marketing efforts (e.g., media buys, event planning, email marketing and social media) and branding initiatives to establish greater consistency across marketing initiatives. One of those people can be your liaison with an outside design firm, eliminating the need for in-house graphic designers.

Every Business is Different

Knowing when to hire is a critical part of the growth process for every private lender. It all comes down to recognizing key indicators that require you to make additional hiring decisions (e.g., loan volume expansion, diversification of products, or geographic expansion). Although these are not the only key indicators, it’s important to realize that any decision to hire should align with your strategic growth objectives and commitment to providing quality customer service while managing risk effectively.

Yes, hiring can come with numerous challenges and costs, but ultimately you must find that delicate balance of expanding your team to meet future goals while ensuring the long-term sustainability of your operations both financially and operationally. By making informed and timely hiring decisions, you can set yourself up for continued growth and long-term success as a private lender.