Third in a series detailing how one lender navigated the daunting task of establishing a private money fund.

I thought we would be further along our fund establishment journey than we are. When my partner Eric Saiki and I obtained our Fund Manager I and II certifications from the American Association of Private Lenders (AAPL), we were raring to go. Delays have set in, however.

Fortunately, the delays are a result of our desire to put this fund together under our terms while balancing our legal careers and family lives. The old saying is never truer, “If you do not have time to get it right the first time, where will you find the time to get it right the second time?”

By the end of the 2022 AAPL annual conference in Las Vegas, we had the knowledge necessary to start a fund and manage it along with its investors. The large bandwidth issues included establishing a management entity, establishing a fund compliant with securities laws that maximize tax opportunities, licensing, marketing, technology, and ensuring compliance with AAPL’s Code of Ethics.

Phase two of our journey involved drilling down on the issues we identified in the first phase. We interviewed securities lawyers, researched licensing issues, and researched and established the management entity. In addition, we interviewed several software providers in the following three spaces: origination, client relationship management, and servicing and investor relations. We also identified the strategy of white label lending, a pathway we though would allow us to originate loans and build the company on parallel paths.

Phase three is upon us. Our two main goals for this phase are (1) to begin originating through white label lenders and (2) to work with securities lawyers to establish the fund. We had the white label lenders identified and a securities law firm in mind. We had just one minor matter to address and then we’d be off to the races—or so we thought.

Website Woes

The minor matter was our website. What seemed like a simple project took on a life of its own. The challenges are mainly because we treated the website as an extension of ourselves. It will be the first impression of us for many, and we all know the old adage that one never has a second opportunity to make a good first impression. We therefore set our standards high and opted out of creating a quick and easy one-page website. Ultimately, our website consumed us, bogged us down, and prevented us from focusing on revenue-producing activities.

Our initial strategy was simple. We used one of the many website-building services and did it ourselves. We worked on the content together and nurtured our joint vision. As a result, we will not be beholden to website developers. In the future when we need to make the many intended changes, we will do so swiftly and efficiently.

Some might argue that developing a website on our own was “penny wise and pound foolish.” For Eric and me, it was never about the monetary outlay for a website developer. Websites can be professionally developed for a very reasonable price these days. Personally, I have been known to spend more on wine over a short weekend in Paso Robles.

For some, a website is a mere presence—a static page in the cyber universe. We want a site that can act like a town hall for us for years to come, one that is constantly evolving with a blog, articles, testimonials, and examples of recently funded transactions. We want a basic and functional website that will be our living, breathing connection to the cyber world and will stand the test of time, not something that will merely help us move from point A to point B.

Although I am proud of the site we have built, I do regret not hiring a professional, including our white label providers’ offers to create a site for us. They could have created a basic landing page for us by a white label lender for free. In fact, for a small fee, they would have put together a more complex website while we built our own uber site.

So, yes, we love the site we completed ourselves and that we can manage ourselves. Nonetheless, we realize now that we would have gotten off to a faster start if we’d spent more of our valuable time originating instead of wasting it on something that could have been outsourced.

Adding insult to injury, as we were ready to go live with our website, we discovered a problem with the white label strategy. The proprietary origination software utilized is not to the level of the origination software created by providers who specialize in private lending software. The origination software we originally researched for our own use in the fund is much better than the white label software because the former is built for private lending and the latter is not. On a piecemeal basis, the white label software can complete the job; however, this basic software will create much more work for us. Those looking to be a long-term player need to partner with one of the software companies specializing in this space.

A CRM Victory

One bright spot in Phase three is the client relationship management software we found. As you may recall, we spent a lot of time in Phase two trying to find an all-in-one option for originations, CRM, and servicing, ultimately realizing that to get the advanced features we needed for each function, we had to find separate platforms for each one.

The platform we selected for CRM allows us to communicate with investors, referral sources, borrowers, and any group we see fit to create. The software is so powerful that our account executive can set up an entire annual marketing campaign in hours. On January 1 of each year, our marketing campaign for the year will be set up. Using emails and posts on Facebook, Instagram, Linked In, and Tik Tok, it will send out holiday cards, birthday cards, jokes, recipes, newsworthy items, and much more. Our outreach will be constant and interesting. If we want to send our clients information on products or success stories, we can do that very easily as well.

One thing to consider when selecting a CRM is how it integrates with the software you’re using to maintain current contacts. Consider finding either a CRM that integrates with what you currently use or one that can stand alone (one that will fulfill your marketing needs while acting as the central hub for all your contact information).

Closing Out Phase Three

As we complete Phase three of our journey, we are finalizing licensing items we can complete without the help of securities counsel. We are also designing a logo.

Once the site goes live and the white label is plugged into it, we will let loose our marketing campaign and begin originating loans through the management entity. Once we begin originating loans, our next call will be to securities counsel.

We anticipate Phase four to focus on securities counsel and loan origination, if all goes well. Once the fund is in place, the real fun will start: We begin working with investors and helping them achieve success.