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6. Find if two — or three — are better
My experience suggests that two warehouse lines are generally better than a lone line. Too many relationships might pose problems, but diversifying to two or three can aid your growth in many ways.
Some warehouse operations restrict transactions they fund. One could limit nonprime loans, for example, to 10 percent or 25 percent of a line. In this case, it would pay to have one warehouse lender mainly for prime loans and another for nonprime products.
Consider receiving a warehouse line from a company with ties to an investor, too. This multifaceted relationship gives the warehouse lender an incentive to make life easy for you. Verify upfront that the warehousing partner is equally interested in your loans, whether they go to the affiliated company or to other investors. That flexibility will help maximize your business.
7. Be sure you’re a good partner, too.
Once you’re working with a warehouse lender, continue to pay attention. Every relationship takes two partners working together. Some ideas:
Involve your operations people in the decisionmaking and train them to succeed. Real-life experience of funding loans is a big step. Ask your operations people what works and doesn’t in the funding process. Have them list what’s important to them and consider those in your lender selection.
Recognize that warehouse lenders don’t earn much per loan, and streamline operations to make interactions quick and efficient on both ends.
Teach your people to send necessary data for submissions in the right electronic or paper format to speed up processing and avoid bottlenecks.
Stay on top of lenders’ need for information to manage risks. Both parties waste time if they must chase each other down for routine data exchanges under warehouse-line terms.
In the bigger picture, don’t take your lines for granted. Invest the time and energy to select the right warehouse lenders for your company’s people and culture. Keep your organization focused on using these relationships to help you make more loans.
Warehouse lenders are all about helping close transactions and getting them sold to your investors. That’s how we get paid. And that is how you will continue to grow.
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