What Gives Tech-Enabled Lenders the Advantage?

LADERA RANCH, CA—Combining the smart use of technology with in-depth knowledge of the space and stepping in where traditional lenders haven’t been able to meet increasing demand for capital puts alternative lenders ahead, Money360’s CEO Evan Gentry tells GlobeSt.com. The direct lender closed more than $100 million in loans in the third quarter of 2017, bringing the company’s total loan closings to over $450 million, with a target of $600 million in transactions by year-end.

We spoke with Gentry about what tech-enabled firms like his are doing to increase their market share of CRE loans and why they have an edge over traditional lenders.

GlobeSt.com: What are tech-enabled lenders doing to increase their market share of CRE loans?

Gentry: In the past few years, tech-enabled lenders have stepped in where traditional lenders haven’t been able to meet increasing demand for capital in the commercial real estate sector. Over the first half of 2017, Money360's cumulative loan originations more than doubled, thanks to our ability to provide certainty of execution, flexible terms and fast closing times. As we continue to develop our technology, we anticipate business models like ours to continue to gain market share.

Beyond technological advancement, we see partnerships as a channel for alternative business models to continue to gain traction against more traditional players. We anticipate more players in the space will join forces to increase options for borrowers and lenders. As Deloitte noted in its 2018 Real Estate Outlook, “There are many ways in which traditional RE companies can benefit from the solutions offered by RE fintech firms. The platforms these firms provide can expand and diversify the lender base and enable more individuals and institutions to get exposure to real estate.”

GlobeSt.com: What gives these lenders the advantage over traditional lenders?

Gentry: Primarily, it is the surety of execution and liquidity for borrowers and strong risk-adjusted returns for investors, along with the use of technology to improve speed, efficiency and transparency.

What it ultimately boils down to is being able to combine the smart use of technology with in-depth knowledge of the space. Each member of our team has on average 20-plus years of experience in commercial real estate lending and has been through two, or even three, economic cycles. This means we have deep insight into how to underwrite and structure a loan and how to protect investors from any adverse circumstances that may arise.

GlobeSt.com: What capabilities do you see these lenders having in the future that will continue to give them an advantage?

Gentry: Borrowers, when faced with the choice between two business models offering loans with certainty of execution, will choose the model that can fund them faster and with more flexible terms. The advantage tech-enabled lenders have that traditional lenders can’t yet compete with is speed. We are continuing to double-down on technological advancement to improve speed and efficiency while maintaining robust underwriting standards through a leadership team with decades of experience in commercial real estate.

GlobeSt.com: What else should our readers know about tech-enabled lenders?

Gentry: It’s important to remember that all alternative lenders are not created equal. There’s a lot of confusion within the space on the various business models that fall in the “FinTech” bucket—whether crowdfunding, marketplace lending and direct lending (Money360 is a direct lender). There are distinct nuances between and purposes for each respective model, but the terms are often misused, sometimes leading to confusion in the marketplace.