No lending company is too big or small to benefit from using loan document software for managing and creating professional loan documents. In July 2023, Rocky Butani, CEO of Lender Link, visited Lightning Docs’ office to interview Nema Daghbandan, Esq., discussing the types of lenders who benefit from their document software and how the data collected helps clients make actionable decisions for their business. Watch the video or read the transcript below.
ROCKY BUTANI:
What types of lenders are using Lightning Docs and how many lenders do you have or how many transactions do you generate? Are we talking mostly institutional-backed lenders? Are they pipe or local? What are some of the types of lenders you serve?
NEMA DAGHBANDAN:
It’s really interesting, when we created Lightning Docs, we started licensing it out to our clients, we didn’t really differentiate on who. We just said, well anyone that really wants to start using it, we didn’t really care. There’s no size limitations. It doesn’t matter whether they do one loan in a year or they do 500 loans in a month. You will find both of these people coexisting on one piece of software, which I think is somewhat of a unique approach. I remember years ago we were dabbling into a little bit of consumer lending and I was trying to get a license to use Docutech or one of these companies out there that does consumer loans. And I was like, my volume was like five a month or whatever, but it was back then. And for that kind of stuff, they just wouldn’t even return my phone call. It was like, we don’t care about you. That shows you the scale of the worlds.
But the vast majority of users on Lightning Docs, in terms of volume, there’s probably about 175 total users of the system, and I would say 80 to 90% of them probably do less than five transactions a month. And that’s really unique because you’re actually getting a ton of information and data about a very diversified set of people and geographies and everything else that’s coming with it versus getting maybe large transactional volumes, but from a very small subset of people. And Lighting Docs also has very large users, so it’s not like we’re missing.
What you’re really seeing is a really interesting view on what I would say is in an industry. Forecasa for example, they kind of benchmark the aggregation of data in the industry altogether. The industry represents about, $1 billion or whatever the magical number is that month. So we started looking as a parallel of, well what is Lightning Docs in comparison to the industry? And when you look at it that way, it probably represents about 10% of the entire industry. And the nice thing is, it’s a diversified broad set of people that sit within them. So what we are seeing on our side of it is you can see what is the spectrum of interest rates because fewer products say, let me go to the top five lenders in the country, their spread in interest rate, for example, probably within 50 basis points. They would have to be, otherwise they’d be completely out of market. But if I can tell you, well what about the person who just really originates two loans a month. Interesting piece of information to know is what about them as well. When you start throwing all of that information, now we can say, hey, if you were to offer a private loan product in the market, your interest rates are somewhere between 10% to 12%. And here’s the spectrum that you’ll see of concentration within there. The average of that is 11. I just saw the data for last month, and the average is 11.28% nationally. And then you can start drilling down a little bit deeper into that and saying, all right, well let’s talk about that. Is that a bunch of people at 10 and then a bunch of people at 14? What is that? How did we get to 11.28%? And so the users are so varied that you are really getting interesting market intel about what is the national landscape. And then even beyond that, it is national approach. So in the month, or last month when we were looking at the data, we saw 31 states with activity. So we now have a pretty wide spectrum. In last month we’ve had 2000 transactions, I think it was technically 2009 in aggregate. So you’re getting a lot of really interesting pieces of information that come from this because we see it as our responsibility.
My background was being a lawyer for a private lending law firm. So that’s my nature and my background. So for me, I was always representing that type of client. When we were representing them as lawyers, I always wanted to provide them with as much information as possible. I wanted to help them in any way as possible. And I think you have a similar philosophical view of, well, my business is this, but how else can I help you? And so with Lightning Docs, we get the really cool advantage of being able to just help our clients out and help the users saying, Hey, here’s kind of the aggregation of the information. Are you in market? Are you out of the market? And you can get really drilled down.
I did a presentation a few months ago and I can’t remember what state, I think it was California and I think it was like 10 or percent was the state average over a period of time. But then when you actually broke it down by county, you saw wild disparate amounts. You saw it’s down as like 7% in certain markets and then all the way up to like 12%. And it shows you, people always talk about real estate being local. Real estate’s really local when you’re talking about bridge lending. And so it really gives people an ability to understand for a second is are they in market, in their market? And also what are potential opportunities that may present themselves? Because what if you are trying to get a more aggressive yield? Well maybe stay out of that market because you’re fighting a pretty rough current over there versus these other counties that are in MSAs that may not seem as attractive, but you can get 150, 200 basis points more because you’re in that market.
ROCKY BUTANI:
So you collect a lot of data. Let’s say you have an average of 2000 transactions per month, so you’ve got all this information, do you sell this to lenders and how much does it cost?
NEMA DAGHBANDAN:
So we don’t, what we’ve done to date, and it’s not to say that we never will because data is valuable by all means, but putting back on my old school hat of being an attorney who cares, I found it interesting. I love this space, I love the clients, I love what I do professionally. It does not feel like work to me. So for me, I was like, oh, this sounds really valuable. I could spend, and I do spend a lot of time in it just pondering, I want to know things that don’t really matter at the end of the day. For example, I want to know, lately I’ve been looking at, hey, let’s look at historic highs. March of 2022 was a historic high for a lot of people. Well, what has happened with those same users? If I just look at people who have been using Lightning Docs before March 1st, 2022, and those same users, what’s happening with their volumes? Have they been picking up? Because I think that’s a really interesting piece of information and I just want to share it with them saying, Hey, the industry itself is down roughly 25% from its peak in March of 2022. It had a low point of about 36% in January or so. And then people can say, well, is my volume kind of correlating to that? Yes or no? It gives them an ability to understand how has their business been impacted vis-a-vis others in the market. I think that’s something I wish I, as a law firm, I’d love to know that piece of information. And so we’re really just trying to give back, I think, to people and really give them an opportunity to understand their business and take what is very opaque in nature, which is private lending, and provide a real insight into the market so that they can make actionable decisions on them.
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