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Launch of a New Digital Loan Marketplace for RIAs Speaks Volumes About the Current M&A Climate

By Garrett Keyes March 21, 2019

Investment bank SkyView Partners has launched a digital loan marketplace for independent advisors in need of M&A financing, according to a press release from the firm. But some experts say advisors should be careful before borrowing.

The new offering is SkyView’s concept of a business loan provider marketplace, only “digitized,” SkyView founder and CEO Scott Wetzel says. It “creates a competitive landscape for banks who are viewing the applicant simultaneously,” increases transparency, and furthers efficiency, he says. It also helps advisors too, Wetzel claims.

The marketplace matches lenders based on an advisor’s growth strategies and seeks to provide advisors “with the best rates, terms, and conditions possible” on their loans. Partner banks view online an applicant’s metrics — like credit score, loan-to-value ratio, and whether the loan required is conventional or a Small Business Administration (SBA) loan. If an agreement between the advisor and lender is reached, a term sheet from the lender is executed through the marketplace and the applicant enters a 30-day underwriting period pending completion.

Given the presently “frothy” RIA M&A market, a firm building a digital marketplace doesn’t surprise Dave Barton, vice chairman of Mercer Advisors.

“Consolidation in the RIA industry is a real thing” and “it’s eat or be eaten” for smaller RIAs, he says. “SkyView’s [offering] tries to fuel [firms] that are eating.”

SkyView is giving independent advisors access to “capital to enter the M&A market,” he says. But firms participating in SkyView’s digital market should “be careful what they wish for,” Barton warns.

The loan terms will be “very sophisticated” and it’s very easy for advisors to “take on too much debt,” he says. “It’s great to have access to capital, but you better understand high finance. It’s a very complicated and sophisticated world,” he says.

“Nothing against SkyView, but the loan brokering model in [the financial advice industry] is the worst. There aren’t many banks that can or should do this type of lending,” David Grau Jr., president and CEO of succession consultant Succession Resource Group, says. “Bank brokers will connect with advisors, [but they] have no experience with our industry and are not chartered for this type of lending.”

Loans usually come in the form of “uncollateralized loans based on goodwill and cash flow,” Grau explains. And “every bank will only be able to handle a few deals” as a result.

Such a situation can lead to a “very frustrating process for advisors. The banks never understand [the advice] industry or get good at the process,” Grau claims.

“It’s always a pain dealing with a bank and commercial loans, but it is even worse when the bank doesn’t know your business. Loan brokers will try to justify the fee they take, but it is always a better deal for the advisor to go direct to the source with Live Oak Bank or PPC Loan — two firms that have been doing this for a long time, are reliable, and are dedicated to our industry,” he states.

Scott Wetzel

Yet SkyView is adamant it has the industry expertise and breadth of offerings to service RIAs.

Wetzel says one of the reasons his firm specifically started the new marketplace was to provide RIAs with loan options beyond the major players, such as Live Oak Bank and PPC Loan — neither of which is currently on the new platform.

SkyView’s platform currently hosts “16 banks and two investment banks,” Wetzel says. It currently has “approximately $74 million in loan applicants ranging from $1.2 million to $16.6 million,” and “another $111 million nearing completion,” he adds.