Is being a smaller lender an advantage or a disadvantage?

by MPA11 Apr 2016

Everyone loves the story of an underdog. We love it when someone defies the odds and overcomes tremendous obstacles. It's not quite as interesting when the favorite always wins. We love the victory of the underdog precisely because it comes as a surprise; it's unexpected.

In the world of business, the underdog is the entrepreneur. We hear countless stories about startups that enter into business with no capital, no business model, and nothing but a dream. In these stories, these entrepreneurs are able to quickly turn those dreams into multibillion-dollar realities. What we don't often hear, though, is all of the stories of those who fail.

In the mortgage industry, we have the same sort of divide as exists in the rest of the business world. We have the major players (mostly banks) that everyone hears about in the news, we have some mid-sized lenders, and then we have the smaller, more entrepreneurial lenders trying to make their way in the industry. So, which is better -- being the big bank or the entrepreneur?

Being entrepreneurial certainly has its advantages. You are smaller, so you don't have the bureaucracy that comes with a large organizations. You can make important decisions more quickly and waste less time carrying them out. On the other hand, when you don't have the capital to fall back on, each decision you make is much more risky as a small organization, and you have to comply with the same regulations as the major players. So it's a trade-off.

If you're small, use it to your advantage while you can. Be nimble and move quickly. But keep pushing for greater capital that you can use as a buffer for the unexpected. You never know when you might need it.


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