All third-party financings require the lender or investor to exercise due diligence in evaluating the prospective recipient of funding, and NYPF’s loan facilities are no different. How we conduct our diligence, however, differs meaningfully from standard bank processes and reflects the fundamental distinctions between our loans and conventional commercial or personal loans.
Commercial lenders focus primarily on the operations and capitalization of a business entity to determine whether that business is sufficiently creditworthy to support the proposed debt. Even though the middle market involves private companies with concentrated ownership, lenders rarely focus their attention on the individuals behind them. They lend to businesses, and their diligence is centered on the business itself.
In private banking, most institutions are reluctant to lend against illiquid assets and prefer marketable securities as the primary collateral. As a result, while their diligence procedures consider the borrower’s financial situation, their reliance on marketable securities means the analysis is ultimately focused on the value of those assets.
New York Private Finance is the only bank lender that takes primarily illiquid assets as collateral. As a result, we rely far more on the financial well-being of the borrower — after all, this is a personal loan supported by collateral but ultimately dependent on the individual. We analyze personal financial statements and projected cash flows in great detail, as we rely on the individual directly for debt service and ultimate repayment, which in turn depends on the operating performance of the underlying collateral assets. But it is to the individual himself that we look for credit strength, investment expertise, and, most of all, integrity.
Please contact us to learn how we can help.
