Fort Lauderdale, Florida (PRWEB) September 17, 2014
Kyle Meyer, Managing Director of Open Source Capital, LLC explains that its commercial real estate lending platform has been designed so that Wall Street can engage in “Crowdfunding” by becoming Financial Sponsors.
Meyer states, “In most of our deals we are looking for two types of investors: Financial Sponsors and Crowdfunding Investors. Financial Sponsors include private equity funds, family offices and commercial lenders."
The question: Is there a sizable benefit to including a financial sponsor in a company’s crowdfunding capital raise?
Financial Sponsors are professional investors that must hit specific target returns on their money. Financial Sponsors typically raise money from investors and need a significant hurdle rate in order to make a return that is profitable for both the lender and their investors. Despite this limitation, experience shows that it is actually a good idea to include a financial sponsor in a crowdfunding raise. Here are the primary benefits:
First, having a Financial Sponsor involved in a capital raise helps with due diligence and deal discipline. Anyone who has ever tried to raise money will tell you that there are about a hundred roadblocks that have to be solved in order to actually close a deal. Between investors needing more time to make decisions, appraisers wanting more information, and other unexpected hiccups, even the most veteran lenders have an exceptionally tough time closing complicated real estate deals. However, financial sponsors are in the business of making loans and because of this, they’re tenacious when it comes to closing deals. As a result, financial sponsors tend to have an excellent grasp of deal structure, loan pricing and the market. Therefore, knowing what is needed to be done and having the ability to properly underwrite and fund a loan is priceless. Additionally, having a Financial Sponsor helps determine deal pricing. Financial Sponsors are in the capital markets everyday and know what interest rates are attractive for different asset classes. Involving Financial Sponsors in a capital raise improves deal certainly. Because Financial Sponsors are generally driven by certainty, the loans that they’re willing to make are predominantly based on a company’s prior experience. Consequently, Financial Sponsors are happy to make loans to borrowers that they know can perform and borrowers working with a Financial Sponsor have greater confidence knowing that the deal will mostly likely get done.
The ultimate benefit to crowdfunding is that by having a Financial Sponsor that performs sophisticated due diligence and validates the deal, borrowers can get loans and also develop a following of investors, while investors can get access to professionally vetted deals.
Open Source Capital, LLC
Open Source Capital has embraced the internet to help give real estate investors access to private placement offerings that may have been denied to them in the past. With over 25 years of experience in finance and real estate development, Open Source Capital can assist both new and experienced accredited investors in reaching their investment goals.
For more information on our Financial Sponsorship program, click here
Kyle Meyer: 954-848-6200
Certain information included in this press release may contain forward looking information that is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are OSC’s ability to raise capital, risks associated with OSC’s business plan, national and local economic conditions, including conditions in the homebuilding and construction industry, conditions and trends in the real estate industry in general, changes in interest rates and other factors.