‘LendingTree for Advisors’ Launches to Help RIAs Compare Loans

The number of banks willing to lend money to wealth managers continues to grow. But not all loans are the same.

(Illustration by RIA Intel)

(Illustration by RIA Intel)

A new website has launched to help wealth managers seeking loans choose the best lender for their needs. It promises to save them time and money, ensure mergers and acquisitions go as planned, and it could eat into referral fees collected by coaches and consultants.

LendingWell is a free online matching service specifically for financial advisors that uses a 10-answer questionnaire and reviews of lenders to make recommendations. Once a would-be borrower is matched with up to three lenders, they have the option to contact the lenders and forward the information shared with LendingWell. Loan officers at the lenders will then get in touch with them and begin the loan process.

Borrowers can make up to three requests per month, so if they need financing for multiple reasons they can solicit different loans. “Every deal is different, and we aim to get the best picture of your situation to provide you with the best lending solution,” the website says.

LendingWell started as an internal spreadsheet at Succession Resource Group (SRG), a consultant to RIAs based in Lake Oswego, Ore. that works on succession plans, mergers, and acquisitions. The company found there were tribal preferences for certain lenders within its own walls and wanted a resource to help it guide clients to the loans best fit for their needs, regardless of who was loaning the money.

SRG didn’t want familiarity with one lender and expediency to be driving factors in helping clients seek financing.

Lenders have their own ever-changing preferences for the loans given to financial advisors. Getting to the end of a negotiation for a transaction and finding out a lender isn’t comfortable loaning money under certain terms and conditions can derail deals, which are time sensitive. That almost happened to SRG in March, David Grau Jr., founder and CEO of Succession Resource Group, told RIA Intel.

“We had accumulated a vast amount of knowledge of what worked at some banks and what didn’t but not even everyone at our company knew what works best and what didn’t.”

The spreadsheet turned into a document SRG began sharing externally and then evolved into the idea for LendingWell, a “LendingTree for advisors,” Grau said, in reference to the popular online lending marketplace.

Using LendingWell, wealth managers looking for financing will save time, money and, potentially, on any transaction they’re involved in. Most of the lenders offer special incentives to LendingWell users.

There are seven direct lenders or matchmakers (companies that connect borrowers and bank lenders) considering or already participating in LendingWell: SkyView Partners, Live Oak Bank, PPC Loan, Byline Bank, Oak Street Funding, Pinnacle Bank, Salt Creek (a national lending division of First State Bank Nebraska). Including the networks of partner banks, there could potentially be more than 40 lenders, according to Grau.

Advisors can’t simply walk into their local bank and get a loan for their business. Most lenders don’t loan money to wealth managers that have little or no assets to possess if it goes out of business. Even banks that do lend them money, might require some old-school wooing.

Before 2013, there were only a few banks willing to make traditional loans to wealth managers but the number of lenders is expected to grow considerably in the coming years, as an aging advisor workforce looks to sell their businesses to upcoming advisors. SkyView, the Minneapolis-based company founded less than three years ago, has already passed $1 billion in loan sourcing, or financing borrowers sought from lenders. But, the company says that represents barely 1% of the total market over the next decade, a total it projects to be between $70 and $90 billion.

SRG spent the equivalent of “tens of thousands of dollars” in cash and working hours to build LendingWell and stands to benefit from the association. LendingWell users will often hire consultants like SRG on whatever they are seeking financing for. The plan is for LendingWell itself to eventually generate revenue, but no specific decisions about how or when have been made, Grau said.

SRG is working with all of the lenders participating in the website, which will also benefit from the stream of leads already screened by LendingWell.

Lenders typically pay referral fees of about 1% to coaches and consultants, including SRG, for making introductions to potential borrowers who end up with a loan, according to Grau. The new matchmaking site could eat into those referral fees but that’s a worthy sacrifice if advisors and lenders are better served, he said.

But more lenders and loans mean a new business ecosystem requiring new expertise and tools.

“No one ever liked seller financing. [More companies] are going to be going to bank financing but the bank financing is already getting more complicated,” Grau said.

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