There is an old saying on Wall Street, “When the ducks quack, feed them”, that encourages raising as much money as markets will allow; who knows when they may close or show less interest in a certain type of financing? That certainly makes sense in the equity markets, but debt is different and private debt in particular. New York Private Finance began life as a consulting firm, the mission of which was to help people de-lever and thereby rationalize their personal balance sheets. We are therefore never inclined to recommend the largest facility theoretically possible.
In fact, most of our borrowers begin with smaller facilities, on the order of $5 million to $8 million and then grow them over time, as need and their financial situation permits. For example, one of our clients borrowed $5 million initially and then grew the facility to $20 million over the next four years. During that time, his investment opportunities increased dramatically, as did the value of his collateral assets, so NYPF was happy to extend further funds to him when opportunity arose.
Another borrower had a $10 million facility, but only drew $5 million to start. In doing so, they were taking advantage of our drawdown period, which enables one to establish the loan but not necessarily draw the entire amount at inception. The balance can be drawn as need arises – or not – as there is no obligation to take down the entire amount.
So, we offer flexibility whether one is coming or going. It is okay to establish a larger facility than may be needed, but not necessary to establish the largest one might conceivably want over a period of five or six years. As the outlook becomes clearer one may scale back or extend, as opportunity becomes manifest and a borrower’s risk parameters more focused.
Please contact us to learn how we can help.
