An intro to SaaS enabled marketplaces for commercial real estate financing
Introducing the 21st Century to the 1980’s.
“A SaaS enabled marketplace (or SEM) is a game changer for CRE developers, owners, lenders, associated service providers, brokers and debt advisors. It digitally transforms how they participate in end-to-end equity and debt transactions.”
What is a SaaS enabled Marketplace (SEM)?
Marketplaces categorised in this way, place emphasis on the marketplace as a primary focus, providing supporting capabilities i.e. software driven, domain specific business logic, automation, data storage plus analytics and comprehensive process workflows, that facilitate buyer-seller interactions with regards to issues such as trust and ultimately fulfilment. These additional capabilities enhance the user experience of both demand and sell side users alike, and other parties necessarily involved in the overall transaction workflow as well as enabling the network effect between buyers and sellers.
SEM’s should not be confused with simple, informational / content driven or forms-based websites (often used to collect data input by the users), which may appear to a user, as having the appearance of automation. E.g. iSelect. You complete an online webform that maps your info to a list of possible candidate insurers. Then you receive a phone call to complete the rest of the transaction. This is not a SEM. Whereas online share trading platforms (e.g. CMC Markets, eTRADE et al) and large B2B Marketplaces like Alibaba, ARE powerful marketplaces – though not all are SaaS enabled, which adds another level of sophistication.
Benefits of a SaaS enabled Marketplace
One other key point to clear up. A SEM, that facilitates the entire loan process between a borrower and a lender (and other 3rd parties needing involvement in the process), IS NOT a Broker nor a Debt Advisor (though you should be able to assign a Broker/Debt Advisor a user role if warranted). Nor just a Data / Deal Room – though it’s SaaS components will need to provide an up-to-date datastore to ensure it has all the data required for managing successful equity and loan transactions.
The great news for loan Brokers and Debt Advisors is that a SaaS enabled managed marketplace is business transformative (for businesses adopting them early), delivering new opportunities to scale businesses and deliver improved standards of highly differentiated, client service offerings.
Benefits for borrowers, lenders, and market participants
A SEM, offering fast, highly streamlined global access to both equity and debt for the commercial real estate industry, may be the answer you’ve been searching for.
You can have your cake and eat it too…
The SaaS enabled marketplace offers a more sophisticated way for borrowers to digitally transform the way they raise equity and debt for commercial real estate projects. It can do so without impacting any important relationships you have with current lenders/investors – on the contrary, it can improve your relationship and lower the cost of doing business for both parties.
Best-in-class SEM’s should offer ongoing financial performance and analytic dashboards for your assets delivering you the ability to access and/or provide reports (at your discretion and tailored for specific users (you, your board, lenders, investors, valuers, insurers etc.)
The best in class will keep you “lender ready….forever…”.
Increased Access to Capital Sources and Flexible Loan Terms
SEM’s should provide access to a wide range of financing options, from traditional debt instruments such as bilateral, syndicated and club loans, mezzanine loans to alternative financing solutions such as pension funds and private placements – globally. It will also allow borrowers to quickly compare different financing options in order to identify the best fit for their project. Where Borrowers choose to assign a Broker or Debt Advisor to a “manage/oversee role across the end-to-end process”, SEM’s analytics, comparisons and other insights should make them more cost effective.
Improved Visibility into Loan Terms and Conditions
By providing a powerful, comprehensive bid process, SEM’s should be able to automate comparative analysis of lender / investor responses. More powerful SEMs should be able to arrive at a ranked list of respondents (best all in cost and terms) showing where the key differences are in a lender’s pricing and terms.
Streamlined Processes and Quicker Closings
The aim of the game is to take the friction out of the process, deliver greater choice of lenders to borrowers (competitive price tension and improved covenants) and increased, higher quality deals matched to lenders’ loan criteria.
To achieve this, SEM’s must be underpinned by sophisticated, flexible software architectures (typically microservices architectures ) to ensure rapid extensibility / interoperability , deliver deep business logic and computing power (and AI of course) in order to simplify, and remove the friction from, complex, multi-faceted, typically domain specific, processes.
Lendhaus for example allows Borrowers to bid out to their preferred / selected lenders, compare responses and if necessary, instantly broaden their reach to other lenders with the click of a button. Bids can be as simple or multi-faceted as is required for your loan requirements. Lendhaus has been designed for everything from smaller mid-market deals ($10-100M) to very large, syndicated or club deals (>$500 M).
Lendhaus provides lender proposal comparisons – automatically comparing and ranking bid responses from lenders using key metrics that can be easily customised by borrowers. Borrowers can then select which lenders they wish to further engage with, inviting them to securely access their data via defined roles. This is to ensure a User sees only what they need to progress their specific task.
In summary, a SaaS enabled marketplace (SEM) provides a sophisticated way for commercial real estate borrowers to digitally transform their access to, and raising of, equity and debt financing.
Benefits include increased access to capital sources, flexible loan terms, improved visibility, comparisons and ranking of loan terms and conditions, streamlined end-to-end processes and quicker/lower cost closings. Because it can automate the comparison of responses from lenders, and broaden the borrower’s reach when necessary, expanding your options is just a click of a button.
With the help of a SEM, borrowers can quickly identify the best fit equity and loan deals for their project, get far greater certainty of obtaining the best loan for their project, in the fastest time frame, and at the lowest cost.
Next time I’ll explore how SEM’s can provide you continuous, full life cycle debt management and why that’s a good thing!