The Private Credit Crisis Explained How It Affects Commercial Financing

So the private credit crisis, we're gonna explain that in this video and how that pertains to commercial financing. If you're a financial professional and you have been working in any sort of lending in the industry, you may have seen some videos, you may have heard some buzz, you may have seen some ex-Twitter feeds talking about the private credit crisis that's been happening. Over the past few weeks, we, myself and Suatrung here, we've been seeing headlines of the private credit funds, some of the biggest funds in the world, ones like BlackRock, Blackstone, Blue Owl, and many of them are starting to gate their withdrawals. What does that mean? It means that they've been preventing, they prevent their investors from withdrawing from the system. So naturally, people are asking, is this the start of the beginning of another 2008, perhaps, financial crisis? And especially with oil prices and the Iran war, yeah, exactly, right? Suat, that's the really interesting part. It looks like a crisis in the financial system, but is actually creating massive opportunities in the commercial financing space. So Suat, why don't you give us your take on this? Why are we seeing several of these financial commenters or people talking about this uncertainty in the marketplace, but how do you look at it from a contrarian point of view? And they talk about the 3.5 trillion and the banks stopping lending with the 2008 regulations, private funds filling the gap, loans that were issued at very low interest rates. And then of course, now those interest rates are creeping up and they're becoming almost unserviceable. So where does this become an opportunity for commercial financing professionals? Well, the world doesn't just stop. I mean, it's the war in Iran. It's not the war in Vancouver, BC, Toronto. It's not affecting us localized. It's just somewhere out there in the ether. I think a lot of people get to the head is that for the average people, we're affected by the news. It's fear-mongering. It grabs attention, bad news sells, right? That's the way it is. For them, that's what makes money, right? For the people who are here in Canada, United States even, business as usual. Will we be impacted? Yeah, eventually. There's gonna be a trickle effect, a domino effect per se, right? But not in the doomsday that the news is putting up. However, what the news does is it grabs this mob mentality going into the direction that they want. It's a narrative. It's a narrative that I see. For a contrarian and business owners, we don't care. It's like, I still gotta sell my beer. I gotta still sell my sushi at the restaurant. People can come eat sushi regardless of what happens in Iran, right? At the end of the day, the opportunities can exist. As a matter of fact, opportunity will magnify because now you're having, we call this eye on the ball, right? Where is the eyes on the ball currently? Not in real estate, right? So they're no longer pumping out the real estate market. They're worried now. So people who are on the fence, they're pulling back. They're not buying. People on the fence about not selling, they wanna sell now. So it's weird, right? So on one point, you have less buyer and on the other point, you have more seller. So what does that create? What does that create? Opportunity. Opportunities, right? Especially for those, the right who's, I mean, you can see this, the book behind you, the who, not how. You mentioned that all the time. You always mentioned about, it's not about the how to structure the deal. It's knowing the right who, who is looking, there are lenders out there, there's hard money out there that is looking. They need that money to go out. They need to go out and have it working. And then there's also business owners that need the financing as well. That's right. Yep. The world still moves, right? And financing is just like any business, whether it's corporate banking or whether it's private hard money lender, even the private hard money lender, they have a high risk by having the money sitting there and doing nothing, right? Because they got to pay out eventually. They're showing that their projected income is going to be based on the returns that they get from letting out that money. But if they're not letting out that money, how can you give it to the returns to the investors? Yeah. And many of these headlines, they make it sound as if there's no money out there. Maybe from the large institutions, but I mean, there's always, what is it? The private family offices, the boutique lenders, specialty funds. Residing lenders, specialty leasing. Oh yeah. Lots of businesses still do leasing regardless of what happens in the world, right? Sure. It's a high interest rate. Yeah. Because you can't get it at the bank anymore. The bank squeeze the cap. The reserves need to increase because of instability. So when they increase the reserve, means they have less money to lend. And to add to that, I guess what you've seen and even some of my peers who may have come from just traditional like lending, they try one or two lenders and if they don't get it, they feel the deal is dead. But it's actually not really dead, is it? Yeah, that's not reality. The reality is that they got the wrong lender, right? To matching to the loan request. So wrong opportunity, right opportunity, but wrong lender in other words, right? And I think that the challenge is, too many brokers have on one hand how many lenders they have access to or they usually go to, you know? Whereas I have a black book of lenders. I mean, like a Rolodex, the original Rolodex we call it, right? The old days. See, these lenders I rarely talk to, but once in a year, I'll probably go see them. I'll probably send them some business. Well, today, those lenders are getting zero now. So they're really- Now they're more open. More open to listen, yeah. Like example, like just this morning, actually I got received an email from a CEO of one of the private, one of the big private lender in Canada. And the email goes, so I normally don't, you know, I'll be following you, I'll be showing up and seeing what you're doing lately and I see you go back and teaching commercial financing. By the way, and she's like, she's segue on the email. You know, we normally don't do, we normally don't do commercial deal, but if you have a commercial deal that's pretty solid, send them my way, we might entertain it. All right. There you go. So that's a classic. Even the lender who does 99.99% residential lending have reached out to me, the CEO. I mean, come on. Normally they're too busy for the sort of, you know, these kinds of replies, right? Correct, yeah. So that already says, right? And so for someone like that, right, you know, when you have that, right, it's about like understanding, you've mentioned this in your cohorts when you've trained the past and you've got one coming up here, you know, on the 18th of March, right? Yep. You're talking about the, for lenders like that, they want to see more of the capital stack, right? They want to see the risk positioning, the, you know, and to figure out what the lender appetite is, right? And then it's all about the structuring. So you already have, you already have the CEO of a private lending that's showing you signs that they're interested. What would- Yeah, they want to make sure the competency is there. They want to make sure that the background track record, the numbers make sense. These are not like inflated bullshit numbers that you just get your accountant to run projections on. How realistic is it? Yep. What is, you know, like, how can you assure us we'll get to that point? Right. And we'll get our money back, right? So Sue, if you were having like, you know, let's say, and you know, my background, I started with, I did so many different things and eventually got into residential mortgage. And, you know, even if someone's watching this and they're a financial professional, doesn't have to be a mortgage broker, could have been a real estate agent or anything to do in the finance industry, right? And so you understand the numbers, you understand the due diligence and the financials. Let's say I would like to break into this opportunity, right? That lady, the CEO that you mentioned, what would you recommend? What would you mentor me? If I attended your cohort and you were taking me through that training, what would you train me on how to successfully build that relationship and to have a high probability of getting that lender to work with me? Well, first you got to start somewhere. So you're going to know what you're talking about. You got to know your stuff. Relationship building for these hard money, to access to it. Even in the tough times, they got to trust you. They got to know what you're doing. I mean, your competence should be there. Not just like, oh, you know, I'm learning as I go. You know, that's not going to fly with these people. They know right away. They can smell it right away. They say, yeah, we're not sending money to you. Right. Yeah, you probably don't understand what due diligence really means. Right. Due diligence is not sending an appraisal report and sending it to us. That's not even, that's just the tip of the iceberg. Right. That's what the typical residential level does. Correct. Yeah. Yeah, that's it. And that's where they end. We said, no, there's like a huge, there's like another nine, 10 to do's before you send that deal to the hard money lender. The one that I mentioned, you know, they do big ticket deals. It's just, when you ask them for, when you ask them for, you know, say sub $1 million, it's not too hard to say yes to those. But when you ask for 10, 12, $15 million. Yeah. A lot more consideration. Right. Here's the report. Here's my appraisal report. Send me the money. Right. And it's also the stack, right? I think you've mentioned this in other, some of your other trainings where it's, it's sometimes it could, it doesn't always have to be the first, the first file that is 10 mil. It could be, you know, you being able to stack it where it might be a two mil and then you stack it on top of it, another option people will line the credit. You gotta figure out a way to eat that elephant, in other words. You know, when you got a little project, like for example, we've got 150 unit project. You send it, even if you send it to this big ticket lender, they're going to say, well, that's beyond our ticket. Cause you're talking about $30 million deal. We don't want, we don't want to give that $30 million deal to one, one investor, one loan, right? Yeah. So for this, we might, you know, break it down to tranche, maybe three, four, five phases. Yeah. And sure, this one lender would do it. And then when, when this lender is paid back and you want to move on to the next project, they might syndicate with our lender and we might be able to work together with that lender even, you know? Right. That's why our, our unique position is really, really cool is that you're farming. You're not just forever hunting, going hunt new deal, get new deal. You know, you're now you're helping this builder grow from maybe from a couple of units, 20, 30 units now to 150, right? They have no idea how to get there. Yep. And like you said, capital stack is one thing. Capital stack is just a phrase word that it really is like, how do you strategically get them from point A to point B? Right where they're now right now that their competence level is 10, 20 units, 30 units. You got 150. You just can't say, yo, there's only five times that. Yeah, that's five times that. But it's like, now you're talking about carrying costs over a decade, forget about 18 months. Yep. Right? Those phases won't be done in three years. So what would you recommend? I mean, obviously you've got the cohort coming up here. If someone's interested, by the way, you know, don't just, just subscribe. Don't just comment in the comments below. If you're really interested in, you know, perhaps considering being one of SUA's potential mentees and learning, breaking into the commercial financing space, we'll put a link somewhere around this video, probably below or something where you can get more information. You may end up speaking with me or you may end up speaking directly to SUA. Either of us. Right, and so I think maybe we can wrap up by just, last thing would be, what is the value of, because you've always talked about your mentor. What is the value of having the right introduction? So, you know, one thing I know that you, you offer to your core mentees, I'm one of them as well, is that not only were you teaching the theory, the philosophy, the know-how, the to-dos, but you stacked on top of something that I felt was always priceless, which was you would actually help with structuring that very first deal. You would help a brand new beginner who may be transitioning from residential to actually being introduced to a hard lender and to getting their first deal done. Because many times that introduction is priceless. But, you know, what would you say to that? Yeah, I think it's not just introduction, which I'm more than happy to do. When the right deal fits them, I would say, hey, let's use this lender that we'll be using. And that's a quick hurdle to get over at the beginning. Which, where do I go? Which one lender? Like, which one of these ABC 10, there's like hundreds literally in our market. But the one thing that I like is, I don't brag enough and maybe I should because I come from humble beginnings, right? Is that my DNA is present now in these 300 graduates that are using my verbiage, my mindset, the way that I send out these loan requests. We call them executive summaries, right? And it's the way that I do it. And if somebody else in the finance industry looks at it, they'll probably say, this looks like similar to what Sue does. You know, if they're using the same lender as I'm using, right? They might come and say, huh, interesting, right? And many people do know you from 30 years plus, right? In the industry. Yeah, they're like, maybe he's one of their mentees, right? And indirectly you get an easy access, you know, bypass the gatekeeper. And when they see the competence level, they see the, oh yeah, you know. Yeah, Sue was my mentor. That will help you get past quite a few of the gatekeepers. It's no different than a credit score or a confidence score, right? Exactly. Yeah. In the industry. Because now they're scoring your competence level based on Sue supporting you, not just like, I'm a schmuck and you don't know me for holding the ground. Yeah. Right? So, you know, that's the one thing about mentorship that I value because I even spent six figures in mentorship, right? Why? Because I know that area, I'm not very good at it. I want to get to this, to this point where I'm really good at it today. I have to pay to learn that, accelerate the timeframe because I don't have five, 10 years to learn what I need to learn. I need to learn like yesterday. Well, I think also you hit on a really good point there as we wrap up here. It's just, it's not just about accelerating, right? You know, you're, you're paying for that, that knowledge, that wisdom, the introduction, the access. It's also the risks. I'm sure, you know, we make, probably make another video. If you guys like that, like to hear that topic, maybe comment risk below. And we can talk about the, how many risks do you have avoided by having the right mentorship in your life as well? So if you guys enjoyed this video, yep. Make sure you comment below and we'll see you in the next video. Take care.