Key qualifying criteria for our conventional lenders?

• Minimum independent advisor experience from 7 to 10 years
• Acceptable personal net worth of borrower
• Credit score north of 700
• AUM and revenue minimums vary by lender
• Loan amount minimum ranging from $250K to $1M
• DSCR minimum ranges from 1.5 to 1.75

Biggest benefits of conventional loans over SBA loans?

• No personal property collateral (SBA loans can sometimes require a junior lien position on personal property)
• Fixed rate (most SBA lenders offer variable rates)
• Flexibility for acquisition deal structures for partial equity acquisitions, earn-outs, and longer term seller continuation

Is there less paperwork involved?

Yes.

Are rates better than SBA rates?

It ebbs and flows over the years depending on where the Fed sets the rates. In 2018 and 2019, conventional rates were lower than SBA rates. In 2020 and 2021, SBA rates were generally lower than conventional rates. Most SBA loans are set at a spread (2% to 3%) over the Wall Street Prime Rate and most conventional loans are set at a spread (3% to 5%) over the 10 year treasury rate.

Typical origination fees?

Most of our conventional lenders in the advisor lending space charge 1% to 2.5% origination fee.

What about ongoing and multiple acquisition loans?

Absolutely. Lenders familiar and committed to the wealth management niche are more comfortable with lending to advisors who are strategically focused on inorganic growth through acquisitions. Of course, the subsequent acquisitions have to cash flow and make financial sense.

If your intent is to do multiple acquisitions that will need bank financing, we feel it is imperative that you speak to the bank directly about those goals before you get “trapped” with a bank that limits the frequency of ongoing acquisition funding.

How do pre-payment penalties vary from SBA loans?

SBA loans do not have a prepayment penalty and conventional lenders do. Conventional lender prepayment penalty varies. Some will charge a flat 2% for the life of the loan while others will charge a staggered penalty such as 4% year 1, 3% year 2, 2% year 3, 1% year 4.

Most conventional lenders allow for prepayments such as 10% of the loan amount in any given year. The prepayment penalty is primarily applied when the loan is being refinanced with another lender as opposed to making an extra payment.

Should I have to move my current bank accounts/deposits?

You should not have to do this, and none of our lenders require this as a standard policy. If the bank eventually earns your banking business from providing a great loan experience then good for all.

Should I have to flow all of my comp to the lender?

You should not have to do that, and none of our lenders require this as a standard policy. Experienced lenders focused on the welath management industry just ACH the loan payment from your current account.