In our industry, the phrase we hear kicked around every day is “all investment involves risk.” This is true for lenders, for borrowers and for businesses. Every business has its share of challenges and obstacles but I would say that in our industry, the stakes are higher than average. My colleagues and I have learned a lot of valuable lessons while building our business into what it is. The most important lessons have come from taking our lumps. When you get knocked down, you just have to get back up, dust yourself off and get ready to scrap.
In the earlier days of our business, we tried a lot of different approaches in order to build the strongest business model possible. We even dabbled in other business ventures like commercial real estate development, at one point. In hindsight, we realize this diluted the focus on our core discipline – private lending. Then the subprime mortgage bubble exploded and the Great Recession hit our economy like a tactical warhead. Obviously, no one in the financial industry was ready to contend with the aftermath.
The chaos that resulted from the downturn in the real estate market created innumerable problems for businesses in the industry, many of which reverberated through the entire economy. But, it also opened up a lot of opportunities for investment, and it necessitated a fundamental change in our business. This is when we realized we needed to refocus our approach. We had to make a lot of sacrifices over the subsequent years to bolster our company and, luckily, everyone on our team was prepared to step in the ring and start swinging.
We recognized the importance of building up a bulwark against future economic downturns; here are some of the safeguards we put in place. First and foremost, we learned to focus on our strengths. Straying too far from our core discipline just spread us too thin. We also decided we needed to operate with little to no debt on our books. This keeps us nimble because we’re beholden only to our clients. Finally, we set aside reserves. Having cash on hand allows us to better combat whatever economic calamity might happen down the road.
The Great Recession was brutal for our country, and we believe we’re much stronger for having weathered it, both as a company and as individuals. No business model can account for every single eventuality. There are just too many unknowns. This means you’ll get knocked down from time to time, but it’s the getting up and fighting back that makes you who you are. So yes, “all investment involves risk,” but what’s more important to remember if you want to be successful, is “all investment requires grit.”