Caribbean Commercial Market - Finding Funding

As far as the international, overseas, and offshore - and there is a difference between all three - lending markets are concerned, there are many misconceptions and misunderstandings, not only among newcomers to these forms of funding, but also by those who are not so new, but are inevitably not as successful as they could be.

Further, many prospective borrowers think that obtaining funding from an overseas, or offshore, funding source is beyond them. Nothing could be further from the truth. The fact is, particularly in the offshore funding industry, that offshore lenders are predominately considered as funders of last resort. Often that is true - probably because of some bad publicity about certain rogue offshore 'funders'; but that also means that, when a funder in that industry receives an application from a serious borrower, with a viable application, it is more than ready to seriously consider funding the application.

The inexperienced applicant believes that a good broker can find funding for most applications, which sound good enough. If the broker is simply firing out application copies, as if from a shot gun - and so many, many brokers do just that - then that is quite false.

In those cases, only about 10% of transactions submitted to brokers are seriously considered further by lenders. Of that 10%, only about 10% close. In other words, only about one in a hundred of such applications - which are just sent off all over the place - ever get funded. The major lending managers for some of the big institutions and banks will confirm those figures. It is no secret within the industry itself.

On the other hand, brokers, who have a close association with particular lenders, will have a much greater acceptance rate, and therefore, generally, closing rates will be higher. In the case of our organization, applications vouched for and submitted by brokers with whom we have had a long and successful relationship, or alternatively, applications submitted direct from serious and committed borrowers with a viable project, enjoy a success rate of over 90%. That is simply because this reflects the quality of applications, which result from focused and critical brokers, or applicants who are realists, and not just dreamers.

Actually, no more than 15% of the funding applications offered to international loan broker/financial consultants are even worthy of consideration. Yet so many beginners in this industry, or those who do not care, accept and try to place every funding application they receive; regardless of the merits of the application.

Thus, no matter how many sources the broker has, he will not get those applications funded. But so many brokers/consultants persist in being naive. It is little wonder that most funding sources view the average financial consultants with cynicism.

Our position is that, if we consider an application, and agree to proceed with the various steps, we expect that the transaction will close, and that we will fund the application.

Many brokers will advise their clients that, as long as there are sufficient hard assets, i.e., tangible property, the loan is assured - somewhere or other.

That is also quite false. Asset security proffered without a sound plan for utilization of loan proceeds, showing the ability to service the loan, and/or a lack of skill and/or acumen by the borrower, has no real value in the loan market. On the other hand, a solid plan for utilization of capital, from a knowledgeable borrower, can often compensate for a lack in the hard asset situation.

For a business to obtain finance is a means to an end, not the end itself. If there is an urgent or desperate need for the finance, it must be obvious that the injection of the finance will achieve that end. What finance is received today has to be considered as tomorrow's earnings plus interest. If the project cannot rationally evidence those future earnings, sufficient to service the loan, lenders will not touch it. It then does little good to talk solely about the assets, because no lender wants to have to realize on assets. That is not the business lenders are in.

In our organization, experience allows our experts to understand complex financial transactions, and to understand that the differing needs of multiple participants in a transaction do not always permit a single set of parameters to govern. Funding of hotel projects, for example, requires a quite different set of parameters to, for example financing a ship building, or a loan for a factory development. Each project is different, and the financing requirements of each of them receives the careful attention of our experienced executives.

In short, consider carefully where you apply for funding, and be aware of the pitfalls.