Building a Capital Roadmap: The Challenges and Benefits of Creating and Optimizing a Funding Model for Each Stage of a Lender’s Growth
This paper is an introduction to funding models and funding strategies. To be competitive and build sustainable lending businesses, organizations—particularly non-bank lenders—need reliable access to diverse, flexible, and low-cost sources of funds. This requires the active management of capital raising efforts, a near constant search for funding sources, and eventually the ability to optimize the use of those
funds. What is needed is a guide to building and managing a diversified funding model designed to support an organization through each phase of growth, and to be resilient in a shifting macroeconomic environment over successive credit cycles. Lenders also need advanced tools that support careful monitoring of how funds are used, including agreement covenants, concentration limits, and performance, while improving their ability to use capital most effectively and remain focused on continually driving down their cost of funds. Building and properly executing a Capital Roadmap can provide an advantage in this highly competitive industry.