Keeping loan investors happy is no small feat, particularly when markets are in turmoil. Fear and uncertainty can make your investors act irrationally and take actions that are counterproductive to their long-term financial success, which could ultimately impact your own business and growth.
Right now, many investors are fearing the potential effects of rising interest rates, a precipitous drop in mortgage applications and approvals, and REITs and real estate stocks in freefall.
So when it seems like the world is ending, how do you ensure investors stay confident in you and your approach to lending?
Ensuring your investors are satisfied with your performance involves three simple, but key elements: a high level of respect, clear communication, and mastery of your business. The following are a few guidelines to keep you on the right track with investors.
Focus on Forecasting.
Loan investors want to know what to expect in the future. They want to know if you are forecasting continued growth, or if there are potential bumps in the road. Keeping investors informed helps to mitigate surprises and to manage expectations. If your performance is flagging, most investors don’t really care about the underlying reasons why; nor do they want to hear you explain them. Investors are typically only concerned with the bottom line – the return on their investment; which is understandable, as they’ve entrusted your company with part of their nest egg.
Provide Predictable Growth.
Investors want to see their portfolios grow, and they want that growth to be predictable. Although investments are, by nature, risky and unpredictable, investors understandably don’t want to see wild or unexpected swings in revenue or profits. Therefore, it is important to set realistic expectations for investors, and to meet or exceed those expectations on a consistent basis.
Predictable growth keeps investors happy because it provides them with a sense of security and stability. They know that their investment is growing steadily, and they can count on it to continue doing so in the future. This predictability allows them to plan for the future and confidently make long-term investment decisions.
Delivering strong financial results to investors also benefits your company, as it demonstrates your own growth and stability.
Investors want to see a well-managed company that can execute its business plan effectively which, in the lending space, means seeking out stable borrowers that pay their bills on time. Of course, that’s not always possible, and solvency rates often depend on the larger economic picture.
As a result,
savvy lenders need a mechanism to clear bad loans off their books and enhance predictability, or risk unhappy investors and the subsequent loss of capitalization. One such mechanism is a portfolio protection solution like AXY Wrap™, an innovative loss-mitigation tool that shifts loan default risk and allows you to transfer defaulted loans off your balance sheet.
Employ Defensive Business Strategies.
Investors want to know their capital is safe, and that you are taking steps to protect their investments. Although the lending market is not currently experiencing wide-scale defaults, we have seen tremendous growth in foreclosures and other worrying signs that may point to a potential upswing in default rates in the near future.
Demonstrate to investors that you are employing effective business strategies to achieve great returns, while remaining committed to defending their wealth. This includes fortifying your loan portfolio against the ebbs and tides of the lending market. One way to do that is with portfolio protection solutions like AXY Wrap™, a new way to mitigate or eliminate portfolio losses, ensuring that your investors stay on the sunny side.
Maintain and Foster Relationships.
Regardless of how many platforms, devices, and email accounts you use to communicate with clients and investors, lending is still a business built on relationships. Once you’ve established such a relationship, make sure to maintain and foster the relationship by employing and conveying the three key elements of respect, communication, and mastery. After all, if you’re not building relationships and delivering the results investors expect, you’ve got two options — adapt and thrive, or throw in the towel and call it a day.
What’s your plan?
This article does not constitute an offer to sell, or the solicitation of an offer to buy, any security interest in any jurisdiction. This material is distributed for informational purposes only and should not be construed as investment, legal, tax, regulatory, financial, or other advice. No assurance can be given that any investment objective will be achieved, or that an investor will avoid losses or obtain a return on an investment. While the information contained in this article is believed to be reliable, its accuracy is not guaranteed. Individuals should consult with their own professional advisors with respect to the legal, tax, regulatory, financial, and accounting consequences of any potential investment.