Rocky Butani, CEO of Lender Link, interviewed George O. Flint from Sekady to learn more about their construction software for private lending companies (aka hard money lenders). Watch the video or read the interview transcript below.
Rocky Butani:
If I’m a private lender and I’m lending out money for rehab and construction projects, you’ve got this construction management software system. How and why as a lender, should I use the software?
George Flint:
Yeah. So it creates a better borrower experience and client experience for the lender. Create that sticky relationship because you’re making life easier for the borrower to go ahead and create a draw package, any kind of supporting documents that are required by the lender as well. From the lender’s perspective, it creates efficiencies and security efficiency, meaning that they’re able to click in order an inspection within the platform, a matter of four or five buttons. They’re able to order data-title date downs within our platform so they can make sure there’s no mechanic liens and also the security purposes, meaning that you can set alerts and have reports created so that hey, this loan has not had a draw in the last 60 days, or this draw or this project hasn’t had a draw over $5,000 in the last 120 days. So you can set all these different alerts so that way you can manage your portfolio and identify problems before they become a problem.
Rocky Butani:
So it sounds like using a construction management software, it’s just gonna make things easier for me as a lender. So let’s say I use your software, I’m really directing it, I’m setting up the project, then I invite the borrower, their contractors, their subcontractors to all view this and use the same system, right?
George Flint:
Yes, that is correct.
Rocky Butani:
Okay. And then, so ultimately I get full transparency as to what’s happening within the project as the lender, because all the subcontractors have to use this platform. They’re uploading their photos, their invoices, and I can see what’s happening transaction wise, right? In terms of, you know, the bar a borrower getting the invoice from their contractor. I can see exactly what it was and see that the borrowers ping those contractors, right?
George Flint:
Yeah. Correct. Yeah. And you’re a hundred percent correct on that. It definitely creates transparency from the top down, noting that, you know, subcontractors are not required to go into the system. It’s more of an option. Because we are releasing a, what we call a simplified draw process where the subcontractors are not needed. So it can be done on the GCO borrower level, but it still creates that transparency between the lender and the borrower who say, Hey, these are all the pieces of the puzzle. And it creates a ecosystem where things are accessible real easy, and you’re not chasing down documents via text or email.
Rocky Butani:
So if, let’s say the, one phase of the project’s completed, the borrow is essentially gathering all of that information, whether they invite the contractor or the subcontractors into the software. If, let’s just say it’s the borrower, that’s, the only one using it, then they’re providing all of their documentation, their budget, their draw requests are all coming into the software. And then when they’re ready for a draw then we can order the inspection through the software, right?
George Flint:
Yes, that is correct. That is accurate. Yep.
Rocky Butani:
And I’m assuming you have partnerships with all the fund management companies where they’re, they have access to this, they’re familiar with your software, and then they can provide the reporting within the system, right?
George Flint:
Yeah.
When you say fund control, elaborate on that. What do you mean by like the third parties?
Rocky Butani:
Just the, you know, just an inspection, let’s say.
George Flint:
That Oh, yeah. Inspection. Yes. So we have third-party inspection companies and companies to provide feasibility studies and any kind of reporting that the lender requires for their draw, just they can be complete. We have relationships where all that can be done and ordered and fulfilled on our platform.
Rocky Butani:
Okay. And then, I’d receive the inspection report from your software, and then I can issue a draw to the borrower at that time. Right? And then we’re just using the, your software to, to manage that whole process?
George Flint:
Yeah, correct. So inspection report comes in have two ways of doing your review. One, download as a PDF, and then do a side-by-side comparison on a screen or secondly, within the draw package, it will have each trade identified, and then it will have a button for you to push that will populate what the inspection report is specifically for that trade. And then you can say, yes, that looks good, and go one line item at a time. And then once the final trade is done and all of them are checked off as either accepted or not accepted, that drop package is deemed complete. And then funds will be automatically dispersed based on how the project file was set up.
Rocky Butani:
So one of the benefits I guess here is that you’re, you know, let’s say the borrower submits, a budget and then you accept it and you say, okay, I’m gonna give you this X amount for your project, whether it’s rehab or ground of construction, essentially. I can see that all of this work has been completed and I get, you know, kind of real-time, full transparency as to what’s happening with the project, Right?
George Flint:
Yes. Yeah, a hundred percent. Yeah. The transparency, you get real-time update from everybody every time there’s, you can make it as detailed as every time something happens in the project, you’re notified or, Hey, I don’t wanna be notified when these key milestones are indicated in the, in the project.
Rocky Butani:
Okay. And what if I’m a lender, but I’m selling the loan shortly after funding, whether I’m selling to the secondary market, or I have, let’s say I’m in California and I have trustee investors who are the ones capitalizing this deal, Can I invite those investors to the system so they can see everything?
George Flint:
Yeah, a hundred percent. So if you are selling it off, and at the end of the day you’re the one who’s in charge of collecting that documentation and pre-approving that draw to get final approval by either, you know, secondary market or an individual trustee beneficiary, you can have them as a user and then they would have the ultimate approval for that specific draw package. And all you’re doing in that step is making a recommendation, but they have the ultimate say. So the workflow is very customizable on who approves in what order, what sequence, et cetera.
Rocky Butani:
So I can essentially invite whoever I want. If, let’s say I’m the subscriber of your software, I kind of manage everything. I can invite the borrower, the fund control company, the inspection, the capital providers or the loan buyers essentially. So everyone has full transparency to what’s happening with this project at all times.
George Flint:
Yes, correct. Yep. Is anybody you can think of that plays a role and the draw process can internal or external can be invited and have a seat at the table.
Rocky Butani:
So if, let’s say I’m, you know, as most lenders, let’s say I’m a lender and I have, I’ve got my loan origination software, I’ve got my CRM now I’ve got a get another software just for all these projects. Do you have integrations where we could talk to other software systems that we have?
George Flint:
Yeah, so we’re in the process of integrating with a handful of loan origination softwares as well as servicing softwares.
Rocky Butani:
So the way that would work is I would use, let’s say my loan origination software, it gets to the point where, okay, this is gonna actually become a project. We’re gonna fund the loan, then we would switch over to your software. Right? To manage the project?
George Flint:
Yeah. So not necessarily switch over because we’re gonna be integrated and embed it on their platform. I think one of the benefits from integrating into an, let’s say an LOS system is 80% of that, those characteristics to start a file are captured in the application or underwriting process. So what would happen is that it would send that data, it would start a file post-close in the LOS system, and then somebody would go in there, fill in the last 20%, and then activate that file. And now it would reside in the LOS system for the client to go ahead and use and manage on a go-forward basis.
Rocky Butani:
And how about all the messaging related to the project? Is that all done within your system so that I’m not doing manual emails back and forth?
George Flint:
Yes, you can make it so that you can do most of your communication done within the platform.
Rocky Butani:
What are some of the pain points that lenders have when they’re funding rehab or construction projects? What are some of the pain points that they have that your construction management software solving?
George Flint:
Yeah, some of the pain points that we solve for lenders is being able to have one ecosystem and one place to gather and store the documentation. That will help with the herding of cats of emails and text messages of information coming from multiple sources. This way it’s all centralized. Also having one central source of truth on the budget avoids version control and people having fat fingers and then you’re working off an inaccurate budget. Third thing is approval. So if there’s a contingency line item and the borrower needs to move outta that line item, you can have an approval process. So you as a lender can sit in the driver’s seat and say, Hey, anytime you’re moving money around in the budget, we need to approve it. And there’s a protocol for that to happen. Or you can make it so that there’s no approval and they can have it automatically so long as they’re staying within their budget. So this creates a lot more control for the lender to have, overseeing the project and not having, you know, the borrower running away, and doing their own thing, when they shouldn’t be.
Rocky Butani:
And, so let’s say I’m the subscriber of your software, I’m essentially telling my borrower, Hey, you have to use the software system and this is how we’re gonna manage the project. This is how we’re, you’re gonna submit documents and the budget. So the borrower would sign up. So I’m assuming that they’re a guest, so they’re not paying. Right? And the lenders are the ones that are paying?
George Flint:
Correct. Yeah. So the lender will be the one paying and it’s unlimited users, meaning that they can be there as many borrowers as they want, as many internal personnel and anybody else they add to the platform, it be the lender just paying nobody else.
Rocky Butani:
What’s the pricing structure? Is it monthly fee? Is it a per project fee? How does that work?
George Flint:
Yeah, so our, how we charge for our platform, it’s on a monthly subscription fee based on the number of files you have per month. It can be as low as a couple hundred bucks a month and as high as a few thousand dollars a month depending on the volume of loans that you have in the platform.
Rocky Butani:
Okay. And so from what I understand, you have this cool payments system, but that’s really payments that go from the builder borrower to their contractors, or if it’s a GC it goes to subcontractors. So if let’s say, you know, the lender is the subscriber to your software, I’ve got my borrower using it. Can they use that or our account to pay their subcontractors? Or do they need to sign up for their own separate account and then that’s done separately?
George Flint:
Yeah, so that’s a great question. So our backbone of our technology is money movement. We’ve built our own money movement engine, which allows us to disperse funds. When the project’s set up, the lender has the option of paying the funds either directly to the borrower, and then the borrower can re-disperse funds to the general contractor or subcontractors, or the funds can go directly to the GC and then the GC can resubmit funds out to the subcontractors. Or you can have the funds dispersed per invoice mean that each individual subcontractor and general contractor get paid for what the amount is due to them.
Rocky Butani:
So let’s say we’re running a project, as we’re going through, let’s say phase one of the project and we’ve got these contractors, subcontractors submitting their, you know, their invoices, maybe it’s not the first phase, let’s say it’s the second phase of the project. So now the lender’s dispersing the funds, you know, we’ve got this, this draw. We’ve, you know, we we’re ready to pay it out. Can we just pay the, the contractors directly so the borrower doesn’t have to do that?
George Flint:
Yes, a hundred percent. I actually think it’s the best practice is to pay the subcontractor directly so that you don’t end up with a borrower pocketing the money, or a general contractor pocket pocketing the money. You’re paying the subcontractor directly. Because those funds are going to his back pocket and there’s no more pointing the finger that he did and get paid and yada, yada yada.
Rocky Butani:
So there is that flexibility where let’s say the borrower wants to manage everything on their own. So either lender, I’m gonna be paying only the borrower. The subcontractors are not even part of the platform. They have the, you know, the borrower has their own system of paying out their subs. They do have that option, right?
George Flint:
Yes, they correct that. They, there is an option just to pay the borrower directly and have him re-disperse funds that way as well. And so having subcontractors on the platform is completely optional. You can have it go as deep, as wide as you want, meaning you can just have the borrower or borrow in GC or borrow GC and subcontractors.
Rocky Butani:
So it’s up to me as a lender directing the whole project. I can tell the borrower, Hey, all of your subcontractors, anyone who’s getting paid on this project, they need to be part of the software system so that we have full transparency and we can pay them directly instead of giving the money to you and then you do whatever you want with it.
George Flint:
Yes, that is correct. Yep. Very flexible, very nimble and it is on a profile basis, not on a platform basis.
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