EP 515 – Knowing Lender Limitations With Merrill Chandler

NCS 515 | Lender Limitations

NCS 515 | Lender Limitations

 

Many entrepreneurs and real estate investors actively use works of Merrill Chandler to easily get the funding they need, to do more deals, and build their business empire. In this episode, Scott Carson talks with CEO and Chief Strategist at CreditSense.com Merrill Chandler about knowing how to spot lender limitations when it comes to applying for lines of credit to fund your deals. Join Merrill Chandler as he teaches you ways on how to spot lender limitations and take your business strategies to the next level.

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Knowing Lender Limitations With Merrill Chandler

I’m jacked up and energized to have Merrill Chandler from CreditSense and Funding Hackers. Not only is he a great guest on a regular basis. He’s also a great sponsor of the podcast. We’re honored to have him on. We had Merrill on for our Virtual Note Buying Workshop. Great content, great stuff. You can check out the replay of that. You’d be able to see that on a couple of different places that we posted it on. Check out YouTube.com/weclosenotes. Merrill, you’re in the final phases of editing your book and getting it all up there.

I finished two chapters and it’s been written for months. It’s getting in there. I fly fast and loose because there’s much to say and talk about. This has given me an opportunity to document every little jot and tittle, dotting the I’s and crossing the T’s. I’ve made some new discoveries as a result of research that I did, to make sure that every word that is in that book is the absolute, most recent technology that supports underwriting, FICO models, and all that stuff. It’s not dry whatsoever. This stuff is fun because you get to look behind the curtain. I didn’t know editing was going to take so long. We’re giving people a chance to go and follow a link in the chapter so they can download, not the 40 characteristics of FICO measures, but the 150 future ones that are coming down the pipe.

It was one of the things I want to talk about, how you mentioned there are 100 characteristics on the workshop that FICO and credit are looking at. They only look at 40, but you’re already in the process of hacking the system.

They’re insider secrets. What’s amazing is FICO uses a plus or minus depending on the credit bureau. I call it the FICO 40. FICO doesn’t call it that. Some use 38 and some use 43. There are 40-ish plus or minus characteristics that are currently used in the current version of FICO scoring models. The 40 is a subcategory of 150. FICO has published a list of 150. They’ve already run those models against the hundreds of millions of financial transactions to make sure that they work and that they’re predictive. You can’t bring Chase Bank with 30,000 FICO-held computer terminals. You can’t get all that stuff to change overnight, because the FICO scoring system fits within underwriting systems. Lender underwriting systems are the ones that are proved. They’ve got a long game. We’re already optimizing for our clients for those future models. I know the list. If somebody goes and gets a check advance inquiry, that’s a thing. That has a negative effect on your funding. That inquiry itself counts more against you than an auto inquiry, credit card, or otherwise. I’m excited that we’re already modeling the 150. That’s going to be included in our app, the F*able app. People can download and they’re going to be optimizing.

It’s almost like Credit Tinder, swipe left to get funded.

That’s a great way to say, “Lender one, swipe right, swipe left.” Which lender do you want to be able to work with? Every time you swipe the lender, it gives you their rate terms and everything that fits your fundability model. That’s what’s amazing.

It’s funding speed dating.

That would be a great 30-second commercial. It’s like, “What do you have to offer me? Here’s my profile. Here’s my thing. Download the app.” It’s like a job fair, “I am this fundable. Who’s got me? Give me offers.”

We’ve got all these great ideas and things like that. I heard something from when I was sitting through your Funding Hackers Workshop. I pop in on the private Facebook group and I talk to students that are signed up for it. A lot of them overthink the fact of what it takes to figure out where you’re at. A lot of us are intimidated about our past, our wild crazy nights with our first credit card in college and how that haunts us, our foreclosures or short sales that happened a decade ago, that missed utility bill that haunts us that we’ve moved three or four times on. Everybody has a density to overthink those. It’s not that difficult. That’s why you’ve worked to take the thought out of the no-nonsense of getting signed up for your Funding Hackers Bootcamp at as little as $97 to do that. Let’s talk about some of the homework that people have to do prior to that event and how easy it is to gauge and see where you’re at.

NCS 515 | Lender Limitations

Are You F*able

Let’s say you sign up for any one of the packages. On the receipt itself comes a link to what we call our event planning page. It tells you, “These are the things you need to do.” We also have 29 little tips and techniques. If you haven’t registered, we’re going to remind you to register. If you have registered, it’s going to say, “Be sure to make a note to look forward to this section.” There are one, two, three-minute little videos where I talk about different subjects. I will get you ramped up. If you register, I will get you prepared. If you follow that link to the event landing page, there is a video from me that says, “Welcome to the event landing page. Here’s what you need to do.”

There are two pieces of homework or prep work to get you ready. One, order your myFICO Credit Report. myFICO Credit Report is the only one we use. When you’re in the bootcamp, you’re going to learn why Credit Karma is full of shite. You’re going to learn about FICO scores and why they’re not relevant to lending decisions. Order myFICO.com. We tell them to get the advance. It’s a subscription, $29 a month. If you’re going to become a coaching client, we want you to keep it because that’s how we monitor our progress on all 28 FICO scores. If you just attend the bootcamp, you can cancel anytime from that. We want to have real data. We want the truth of your situation as measured by FICO because it’s the algorithm, the lending software that’s going to approve you.

The next one is we want you to take that myFICO and you download a simple worksheet. The worksheet asks questions about your myFICO report. You’re taking probably twelve or thirteen data points. It says, “What’s the range between your highest and lowest score?” “It’s seventeen points.” Fill in the blank. It asks you, “What is your middle score?” You fill in that blank. You use your myFICO report. There’s a tutorial. It says, “Do you want to see a tutorial on how to fill this out, where to find your information?” It’s all right there. You fill that out and you need to bring that because we’re going to use that in the bootcamp itself.

Finally, it’s called an entity audit. Some people have thirteen entities that they’ve collected over time. Some have none. We want to know so that we can help you decide what a fundable entity is. Your funding success comes from having a qualified personal profile that’s optimized for business lending and having a fundable entity. Those are the only two worksheets you need. You need your myFICO Credit Report. If those two worksheets are completed, you’re done. You’re ready for the bootcamp. When you download them, there’s an Excel version and a Macintosh Numbers version. If you’re old school, there’s a PDF you can print it out and write it down. All of those are available in the download.

You’re walking through people with a scoring system on the day of the event and going from there. Some people were like, “I’ve got a D versus a C or a B,” and you’ve taken people from the Fs. What’s your percentage of credit card debt and things like that, how much you ranked? You don’t want to be above 25% to 40%.

38% is the new 100%. We don’t want you to be in the risk department. All the things that you’re referring to are how we synthesize the information to find out how fundable you are. We call it the fundability index. It’s a worksheet that we do together in the workshop. We give everybody a chance to apply for free. If you want to spend some time with me, that’s what the $497 ticket is. With the $97 and the $197, all you have to do is fill out a simple application to get a free fundability strategy session. There’s an application process because we want to make sure that you’re in a position to implement the strategies and suggestions or take advantage of the coaching. If you’re eighteen years old, you’ve got your parents there, or you’re all by yourself, the strategies may not serve you because there are some things you’ll learn at the bootcamp you need to do first before we do the advance strategies. That’s why we have an application.

Many people come to workshops and they get excited about Monday and putting the strategy sessions together. One of the things that we talked about before we wrap up is we give them a top ten, top fifteen. We’ll say, “Here are the top ten things I think everybody needs to do in the next week or the next 30 days to get things to rock and rolling.” We’ve been adding the Funding Hackers Bootcamp to that because that’s a critical part if you start with the end in mind.

People like to wait for New Year’s resolutions to start. If you wait to do that, you’re going to be behind the eight ball again with the holidays and New Year’s. Whereas your next workshop gives everybody the opportunity to, “Here’s how to learn. Shake the rust off a little bit. If you want to do big things in the next year to set yourself aside so when we do have a recession, when things do hit the tank, you’ve got the things in place to get those lines of credit to be able to capitalize on the assets, the notes and the real estate available.”

Most credit lines are a prime plus. The lines we’re getting for clients are prime plus 1%. We had one that was prime plus 0.5%. Most are between 1% and 2.5% over prime. Still, it’s the best money in town. When you’re approved for a line, you follow the instructions, and you use these credit lines the way that protects the lender’s interest, even in a recession, they won’t close or lower your limit. You’re a safe borrower and professional borrower. You’re implementing the things we talked about at the bootcamp so that you can become a professional borrower rather than a rookie or an amateur. You will learn in the bootcamp how to recession-proof your credit lines. It’s the cheapest money available. How many of us took advantage of 2008, 2009, 2010? That was the greatest transfer of wealth in the last century and a half. How do we take advantage of a little blip? We need to be in play as soon as possible so that we’re ready to start capitalizing on these notes.

NCS 515 | Lender Limitations

Lender Limitations: If you surround yourself with good people and give nuggets of knowledge and let the cream rise to the top, it makes things happen.

 

How many of note buyers out there is the saving grace from foreclosure because you guys are picking up the ball that the big institutions can’t carry anymore? They’re like, “It’s too much of a hassle. Foreclose on them.” “It’s too expensive. What do we do now?” “Let’s sell the note at a discount.” You guys have hearts. Bless their non-little black coal of a heart, but Chase is looking at the 1,000-foot view, the next quarterly profits. Note buyers, real estate investors, you guys can work out new deals before the foreclosure. If the foreclosure is inevitable, you take your windfalls and get to play at a higher level. A recession is going to put money in somebody’s pocket. You’ve got to have the resources and the instruments to be able to have credit lines to take down more of these instruments.

There are so many different opportunities. It doesn’t have to be in notes. Honestly, we had Joel Block from Bullseye Capital come on a Note CAMP Commercial thing and Corey Peterson from Big Kahuna Investments. Both those guys issued a similar statement, “The money is in the money.” Not only just collecting it but leveraging the money to go out and make something happen. That’s how the banks are leveraging money. They’re taking deposits, checking accounts, giving off a 0.01% or 0.1% of return on investment. They leverage it out at prime plus 2%, prime plus 3%, which you then can turn around and leverage out. If you’re paying 6% on your money and you’re lending it at 12% for either a short-term loan, a hard money loan at 18%, it’s not a 6% return. It’s a 100% return on your money.

That’s what we talk about in my web class. I talk about the cost of being unfundable versus leveraging a fundable profile. The whole point of getting a mortgage, buying a car, having a credit card is not playing the funding game. Playing the funding game is doing what banks are doing. They lend at a profit. They borrow money cheap from the Fed and turn it on, arbitrage it, and make a profit. I know I’m successful. I love preaching the gospel of fundability, profitable or not. I love that my money can make more money than I can. That’s playing the funding game. Whether the money is in the returns on a note or the ROI on a flip or lending money at interest, making money on your money is the name of the game.

That’s why we’re all about making fundable borrowers because that way you can turn and burn. I don’t know if I’m putting a gun in the hand of a two-year-old. I can help you get the capital. Scott, you’re in Texas. You guys have concealed carries at preschool. In Utah, I don’t know what you’re going to do with the money that we can get you together. Being fundable means getting the lowest possible cost on whatever the money is that’s available from the top-tier banks that have the cheapest rates.

If you were to take a look at the $100 million in lines of credit that you’ve helped your clients with, how many people have you helped out? What would you say the average credit card line of credit or line of credit for a bank that starts off? Is it $25,000, $50,000, or $100,000? What’s the average amount?

There’s a standard deviation because I am that guy, the nerd. There are two things first. It’s $96 million in client funding. Where does this come from? Common as in over 50% is $20,000 to $30,000 first-round per bank. The first initial, if you’re running two banks or three banks, you’re somewhere around the $80,000 to $120,000 mark out of the gate in the first round of funding. There’s 50% left. The 25% is probably in the neighborhood of $40,000 to $50,000. The other 25% are more inexperienced borrowers. They’re picking up the $10,000 to the $20,000. I would say that it’s $50,000 on 25%, the $20,000 to $30,000 in the 50% and then the $5,000, $10,000 and $20,000 on that final 25%. Breaking it down that way, that would be a fair representation.

Those are per line. We usually assist in a minimum of three lines at a time and two additional lines per quarter. That’s how we reach ultimately $10,000. If let’s say in twelve months, you’ve picked up ten $30,000, you’re sitting on $300,000. It’s not technically accurate because the earlier first ones you got are already raising their limits. Within six to twelve months, you can have seven to ten lines if you are following the funding formula. That’s $200,000 to $300,000. What can you do with $300,000?

There are a couple of things to do as a note investor or a real estate investor, thinking about $300,000 lending that out. If you had that lent out at 6% or double what you did. 6% on $300,000 is $18,000. $18,000 coming in but you’re lending on making 12% making 1% a month. You’ve got roughly $36,000 coming in off of that. That’s doubled. That’s $18,000 right there. It’s $1,500 a month in profit coming in off of that, if not more because if I was a hard money lender, I’m going to be charging some processing fees or some points. You start figuring points and timetables and stuff like that. It could have easily come to $50,000 a year income off of it.

That’s the first $300,000, not the second or the third $300,000. That’s the use of the money. I have a trusted hard money lender. Every dime I go out as part of my optimization plan, I pick up every six months different because I didn’t retire them, but I pick up anywhere between $50,000 and $100,000 in business or personal depending on what my optimization plan needs to be. I do everything by the optimization book that I’ve invented and we’ve proven. I do it myself. Each time I pick up a new line, I invest that line in hard money. I don’t even have to do any of the work. I don’t even have to manage those things. I pay the fees. I pay my monthly payments out of my cashflow, out of my personal income. I forced myself to make my payments and pay off that loan while all the principal and the aggregating interest stay in the fund. When my definition of financial success is when my money can make more money than I can.

NCS 515 | Lender Limitations

Lender Limitations: In five years, you’re going to be the same person except for the people you meet and the books that you read.

 

That’s an easy way then to be funding self-directed IRAs, your HSA, your ESA, if you have kids your SEPs. Those are the great ways to put money away that’s they need a growing interest or a tax-free or tax-deferred.

We won’t even get into my fundability application that was being designed is owned by my Roth IRA. I’m investing in a corporation that is going to yield all of that in a tax-free environment. Everything, Scott, is doable. It takes a little bit of time. Let’s say you’re a slowpoke. Let’s say that you’re three steps forward, two steps back. In the million-dollar funding formula, if you’re implementing with numerous banks at $50,000 to $100,000 per bank, what happens if you acquired another $200,000 for a year. Let’s say it takes a whole year to get $100,000. You’re not implementing well. You’re slow, off the mark. You don’t do everything as fast as you want to, but you keep moving forward. The tortoise and the hare, when the tortoise crosses the finish line, every single year that you pick up another $200,000, you’re in $1 million in five years. These are accumulated lines. You don’t have to turn one in, close one down to pick up the next one. $200,000 a year, I’ll take that’s $1 million over the course of five years if I take the slow boat instead of the YouTube fighter across the Pacific.

Five years from now and your life could be totally changed. Greg Reid is often for saying, “In five years, you’re going to be the same person except for the people you meet and the books that you read.” The reason I bring that up here is you could be a whole different person and a whole different animal of your business with the people you surround yourselves with like the folks there with Merrill or the book ARE YOU F*ABLE that he’s been editing and coming out with. It’s the fundable Bible.

It is the Bible of this movement. My objective is to reconcile borrowers and lenders to get the distrust out of the way, get the animosity out of the way and create a relationship where borrowers also know exactly what needs to be done to make a lender feel safe giving money. You want me to treat you in a way you feel safe to give me all the goodies. That’s on me, not on the lenders. That’s on me, the borrower, to make the lender feel safe to give me money. I’m all-in. We’re doing a huge ad campaign. A two-page is coming out. Here’s the language so far. Tell me what you think. It says, “How do we fix a system where lenders lock away the rules of funding and only care about the answer to one question?” On the other side, it says, “Are you F*able?” How do you fix the system where the lenders are hiding or withholding the rules of the funding game, but only one question matters, “Are you F*able?”

That’s the thing in the world these days, it’s gamed for the small guy not to win. You’re playing a game that you don’t know the rules to or you’re being told false rules or scores as we talked about with all this taking place. If you do this and, “You’re approved.” You look at the commercials from everything. I was making a joke about there’s food every commercial break or there’s the new car or the leasing options, all this other stuff that is inundated into our brains. Most people don’t know otherwise any difference. We live in such a financially uneducated society. Do you think you’re doing something right and you’re hurting yourself without knowing?

I call those funding landmines. We’re walking through the landscape and have no clue that we’re going to blow ourselves up.

If you surround yourself with good people and give people the nuggets of knowledge and let the cream rise to the top, it makes things happen. We had Aaron Young on from Laughlin Associates talking about planning for 2020. I make the joke that 2020 is going to be the year of hindsight or hopefully foresight but it only works if you’re taking action between now and December 31st or before that. Waiting until December 31st is waiting to fail. You have to take the time. You’ve got to take the hacks. You got to swing for the fences if you can or make the singles and doubles. Honestly, that’s the way that you grow wealth. It’s not knocking it out of the park. It’s the $20,000 or $50,000 line of credit. You’re not going to get wealthy off of that overnight. It’s going to build wealth a little bit and then that compound interest will double.

A great rule that was taught to me years ago by one of my buddies out there is called the Rule of 72. What the Rule of 72 says is you take any interest rate on investment and divide that number by 72. That will give you the number of years it’ll take for your money to double. If you’re getting 6% interest on an investment, it will take you twelve years. If you’re investing $50,000, it will take you twelve years for that $50,000 to grow to $100,000. If you got 12%, it takes six years. If you’re getting 24%, it will take three years before you grow.

Think about the reverse psychology of having a 20% interest credit card. The bank is doubling its money every three years on you. That’s why you want to leverage that aspect and use those. $20,000 may not be exciting but that could buy a nice little house in Flint, Michigan that was retaining you $500 or $453 a month on a daily broke down. It could return you by buying a condo in Lauderdale Hill, Florida we found where you borrowed $60,000 that you could probably pick up for $25,000 that would rent for $750 to $1000 a month.

NCS 515 | Lender Limitations

Lender Limitations: Practice creates competence which creates confidence which then creates mastery.

 

These little base hits may not be the most exciting, but they will build wealth. As we talked about a lot of times knowing your numbers to get where you need to be. If you did the things and you could say goodbye to your job and be independent, wealthy, and I call by wealth being able to do what the hell you want and all your bills get paid and rocketing out where you’ve got $200,000, $300,000, $1 million in lines of credit from Merrill’s help and his team at Funding Hackers.

The singles and the doubles in that baseball metaphor, they give us the opportunity to learn how to swing then we can get lucky and knock it out of the park. If we are only trying to swing to knock it out of the park, we never practice enough so it’s single and all sudden, “Look at that,” because we’re practicing how to lend money. We’re practicing how to flip a profitable deal. We’re practicing on how to buy notes and go from nonperforming to performing. It’s the practice.

One of the things I teach in my podcast is practice creates competence, creates confidence, creates mastery. It’s practice. Those singles will keep scoring but it’s the practice that creates the rewards. If we’re used to swinging and hitting the ball, one or two of those are going to go out of the park by the Law of Averages. Let’s keep swinging for the singles. Let’s put it out there.

Go out and make it happen. One of the things I want to bring back up here is you’ve got a workshop.

It’s a simulcast. Unless you’re in Salt Lake City, you’re going to be able to watch in the privacy of your own underwear. Make money in your underwear. I’m going to teach you how lenders want to lend to you, you don’t know what to give them to do so.

The best way to get signed up for that for as little as $97 is to go to FundingHackers.com.

Click on the Bootcamp Button. You can also pre-order the book at FundingHackers.com, click Merrill’s Book.

Thank you for being here. Once again, check it out by going to our YouTube channel, YouTube.com/weclosenotes. You can check out the replay from Merrill’s session at our past virtual workshop. Get in the game, get to taking plays. Singles and doubles are the best way to hit the hall of fame. You need to be in your own hall of fame out there. Go out and make that happen. We’ll see you at the top.

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About Merrill Chandler

NCS 515 | Lender LimitationsSince 1997, Merrill Chandler has led the transformation of the personal and business borrowing space—significantly outperforming the meager results of credit repair.

With its basecamp in Utah, FundingHackers.com helps entrepreneurs, real estate investors, and business people, supercharge their personal and business borrower profiles and reach their funding goals.


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