Fairbridge’s Note-on-Note Lending Helps Bridge Lenders Fulfill Loan Requests

As a bridge lender, one of the most frustrating situations you can face is having to walk away from an attractive commercial real estate opportunity because you lack the capital to meet your borrowers’ needs. At Fairbridge, we hear this quite frequently. We replace bridge lenders’ frustration with short-term note-on-note financing, backed by bridge loans and ground-up construction loans.

Fairbridge’s note-on-note lending program:

• Provides the needed capital to complete a bridge loan request
• Enhances yields for the bridge loan originator
• Allows an originator to expand origination capabilities by doing larger loans

Whether you’ve never used note-on-note lending (also known as loan-on-loan lending and commercial A-note lending) or have a vague familiarity with it, this alternative lending approach helps bridge lenders meet their borrowers’ capital needs – and retain relationships.

Not every bridge lender does note-on-note lending nor do many have deep experience with it. If you’re a bridge lender and considering note-on-note financing as a solution for times when you lack sufficient capital or want to leverage your capital, you should ask: What’s the loan-on-loan lender’s process like? Will you have to jump through layers of bureaucracy and paperwork? Will it take weeks and weeks? Can you even be certain you’ll be able to secure enough capital?

Here’s a quick overview of Fairbridge’s note-on-note lending program, and how it can help solve your short-term lending capital needs.

Experience. Fairbridge’s team brings decades of bridge lending experience and in all forms – from bridge loans to borrowers to loan-on-loans to other bridge lenders. Our understanding of the market, creative problem solving, and resources uniquely position us within the niche category of note-on-note financing. We are bridge lenders. We understand the product.

Ability to execute. Fairbridge’s note-on-note program is distinguished by a smooth underwriting process and certainty of execution. Knowing the ins and outs of note-on-note lending enables us to move with confidence and speed to deliver capital.

Yield enhancement. Because a note-on-note lender has senior priority to the originator’s portion of the loan, the note-on-note lender receives a lower rate than the underlying loan rate, providing the originator with leverage.

Let’s look at an example: A developer seeks a $10M loan from their usual bridge lender, who may not have the immediate capital to meet the request – e.g., they’ve already fully deployed their capital, or they prefer to spread their capital over several loans rather than one big loan. Or, they may want higher return for their capital. Rather than walk away from an opportunity, the lender pursues loan-on-loan financing. In agreeing to a 75% advance rate, the loan originator need only come up with $2.5M, while a loan-on-loan lender (like Fairbridge) covers $7.5M of the loan with an A note. The loan originator would have a junior (B note) position.

There are several compelling reasons why Fairbridge is expanding its note-on-note lending program. Here are just a few:

Filling a market void. The need for note-on-note lending is more critical today than it’s ever been. Regional banks and life insurance companies used to be the mainstay lenders for mid-market developments. Today, their lending has dried up as these institutions suffer their own cash crunch or seek to shore up their liabilities.

Fairbridge has both the capital resources to meet short-term loan requests and the flexibility to structure loans. Our institutional, data-driven approach means we can be thorough and diligent – and act swiftly.

Spurring growth: In helping less capitalized short-term lenders leverage their existing capital to meet local borrowers’ needs, Fairbridge enables regional bridge lenders to make more loans – and get development projects off the ground. Note-on-note lending benefits smaller bridge lenders looking to grow, developers who need larger sized bridge loans to move their projects along, and the local economies where these projects are located.

Diversifying portfolio risk. For those interested in investing with a bridge lender, a note-on-note financing program provides lower LTV attachment points and attractive risk-reward. At Fairbridge, note-on-note lending is a strong and conservative pillar of our portfolio construction.

Note-on-note lending: solving multiple needs

Whether for a single loan, or for a pool of bridge loans, whether you refer to it as note-on-note lending, loan-on-loan lending, or commercial A-note financing, Fairbridge’s alternative financing program is helping bridge lenders leverage their capital and meet clients’ needs – all while enhancing originator yield. To find out more about our note-on-note lending program, visit fairbridgellc.com.