Financing for purchasing notes

[Andrew Wiggins]

I’ve talked to a couple of the pros on this forum, special thanks to @Jay Hinrichs and @Chris Seveney, about using financing to purchase notes, specifically first lien, performing notes. It seems procuring financing to purchase notes is difficult if not impossible. 

Has anyone had any success with purchasing notes with traditional financing? Or is this a cash only business?

I would think securing a loan to purchase an asset backed security would be straightforward, but few if any banks are willing to lend. I’d look at hard money but the cash flow doesn’t work for performing notes. 

Appreciate any feedback on this subject.

[Mauricio Rauld]

I am an SEC attorney specializing in syndications. Whether a JV or a Note, those can be securities. It is not the actual structure that matters (ie: JV, Notes, LLCs, profit share, etc) but essentially whether you are generating all the returns for investors. Raising money to buy notes will definitely be considered a security, since a Note by definition is a security unless we can find an exemption. Hope this helps.