Have you ever seen a cool new idea and wondered how on earth it took so long to come up with it?
One such idea, at least in this author’s mind, is matching private lenders with non-prime borrowers online. And a start-up called Strategic Matches is now doing just that.
It works like this:
- A broker enters a client’s application on the Strategic Matches website.
- After clicking <Submit>, a window instantly displays how many lenders match the borrower’s needs. (Click to enlarge image)
- The broker can then send the application to multiple lenders (or just one) for a quote/commitment. (Click to enlarge image)
- Each lender has 2 business days to respond (i.e., send back a commitment or contact the broker)
- After the lender quotes on the deal, the borrower has two days to accept that commitment.
- Brokers tend to use lenders they know. But often, the best offers come from lenders they don’t know and would never try. Strategic Matches helps borrowers get their deals exposed to more lenders, thus improving their odds of securing a lower rate, lower fees and/or better terms.
- Time savings: Shopping private deals among multiple lenders is a manual time-consuming process. Strategic Matches intends to make it far more convenient.
- The system lets newer brokers break into private lending more easily. (That could be good and bad. See below.)
- Lenders can easily pre-screen deals based on criteria that they enter into the Strategic Matches filtering engine. They never have to look at deals that don’t meet their basic requirements.
- It’s a simple way for private lenders to attract deals when they have idle money waiting to be lent out.
- Agents don’t need to give up control of their files by co-brokering with a “B-desk” or another broker.
- Agents don’t have to split their broker fees with anyone else (besides their own brokerage, if applicable).
- People don’t work for free, so Strategic Matches takes 1/4 point from the broker. That fee applies only if the deal closes. Brokers will likely pass it on to the client through marked-up broker fees. One can easily argue, however, that the client stands to benefit by having his/her deal quoted on by multiple lenders.
- Some lenders on the system won’t accept broker submissions that are sent to multiple others. In such cases, the broker must send applications to those lenders individually and then wait a while before sending elsewhere. That adds a small amount of inefficiency for the broker.
- If the system ever really catches on, the competition factor could potentially push down yields at MICs and private lenders. (This could be a positive for consumers.)
- Some brokers may not do enough due diligence on an unfamiliar lender before recommending it to the client.
Strategic Matches has 29 lenders from B.C. on its system, 14 from Alberta and 7 from Ontario. The focus during the rollout is British Columbia, but founder Al Kelly plans to ramp up in Alberta and Ontario in short order. The number of participating lenders could grow rapidly if/as the service catches on.
It’s all residential financing for now. Kelly says commercial will come later.
In toying around with the interface, data entry is painless for the broker (and for the lender, for that matter). The broker dashboard could be a bit less cluttered with more easily accessible summary data on deals, but that’s personal preference.
If executed properly, this is an idea that could hit it big. Someday, many could be asking, “Why didn’t someone like D+H invent this?”
More at: StrategicMatches.com
Rob McLister, CMT