The following is a guest contribution from Richard Pallarino. Leon C. McKenzie is Founder and President of Sure Sports Lending. He launched Sure Sports Lending in 2009 to focus on an underserviced market of providing athletes with competitive credit facilities.
(1) Your company title gives a small insight as to what it is your business services include. Can you expand on what services Sure Sports Lending offers? And to whom are these services offered to?
Sure Sports Lending provides loans to professional athletes and top prospects who are draft eligible based primarily off their current and future income, or contracts. Our loans are primarily unsecured, however, we do mortgages, and auto loans.
Sure Sports Lending specializes in the underwriting of these loans and has been able to put together a very competitive network of Banks, primarily community banks, to fund the loan requests that are brought to Sure Sports Lending. Because our network of banks exceeds over 100 Lenders, we have been successful at originating unsecured loans generally between 5% – 8% for players with limited credit and assets. Our lowest unsecured loan to date was at 3.25%, 100% unsecured. We do also refer some of our loans to our network of private lenders, which are generally priced slightly higher. Lastly, we do lend some of own money.
(2) Your business is something that’s very unique. What made you choose to start this type of company?
I am a former banker and I realized that young athletes (Players with less than 5 years of professional experience) were having difficulty obtaining quality rates on loans to meet their needs. Private Lenders tend to charge 18% – 34%. So, rather than trying to force players into existing bank products or into predatory loans, we created a bank structure strictly for athletes and credit officers have accepted and adopted our proposed facilities.
(3) It says on your website that your minimum loan is for $75,000.00. Where did that amount originate from?
A few years ago, we raised the number from $50,000. We found that $75,000 was a number where the fixed costs attributable to underwriting, legal and documents would be more palatable for both the Borrower and Sure Sports when expressed as a percentage of the overall loan.
(4) Has your company ever had a problem where a client would miss payments or even go as far as not pay back the loan?
Any time you lend there is repayment risk. The key for us is to stick to our primary focus which is to underwrite the loan and place it into our one of our affiliated banks. As proposed, all of our loans placed in banks have very strict, but fair, structural requirements. None of bank loans that have adhered to these guidelines has ever had a loan not fully repay.
Unfortunately, private Lenders make their own rules for each private loan. We make strong recommendations, but at the end of the day, the private Lender makes the rules and prices the loans accordingly. We have seen a host of private lenders fail, because they walk in thinking they already “know” the business and don’t fully utilize our experience and resources.
(5) What is the competition like in your industry?
EXPENSIVE! There are a few quality hard money Lenders that run quality businesses and they are alternatives to utilizing Sure Sports Lending such as Cobalt and Brewer Sports. They are good groups, but their prices are up there a bit.
Then there are the aggressors we see from time to time. Many of them approach us for new deals, looking to take advantage of athletes in need. Recently, a player with a guaranteed contract was offered a loan at 26% (All 26% was paid at closing). Because we have access to bank money, we were able to approve the same loan at 7% APR, with a 3% fee for underwriting and a 2% bank origination. That is far from our cheapest rates, but this was a player with a FICO around 500. These predatory Lenders try to fund immediately and include stiff prepayment penalties so players can’t restructure their loans as their credit and assets improve.
No private group has our capability to price banks against each other to get the best offer for each individual athlete. It reminds me of the old tagline, “when banks compete, you win”. The private lender’s cost of funds are so high that they can’t directly compete with Sure Sports Lending.
(6) What is the biggest obstacle you and your company face on a day to day basis?
Timing and trust.
Timing…We underwrite our loans within 48 hours, but our banks take around 10 days for most loans to issue final approval and loan documents. That is extremely fast for banks, particularly for unsecured credit, but it is still slower than private lenders promising bags of cash when a player is in need.
Trust…There are a lot of people trying to get a piece of the pie that is the modern day professional athlete. Good agents, advisors, business managers, etc… are protective of their relationships and tend to keep going to that hard money source they have utilized for years. We have done an excellent job of growing the trust with everyone we have had the pleasure of working with, but it takes time. Also, banks are hesitant about doing business with athletes, because there is always press related to athletes going broke. Again, we have done an excellent job with our banks and often new banks that we work with spend a lot of time talking to bankers that we have worked with in the past. That is what I am most proud of. I can give every new bank, 10 – 20 recent bankers to speak with and they all have the same consensus…working with Sure Sports Lending in the best way to work with athletes on credit facilities.
(7) What type of marketing does your company use to grow business?
We throw a few open-bar social events a year where business professionals associated with athletes congregate. We have a really nice event every year during the NFL Combine annually. We also do events around the different sport’s all-star games, drafts and those types of events. The target is to get to know the faces of the people in the trusted circles revolving around each athlete. Going forward, we will be far more aggressive in our marketing efforts, not to encourage athletes to borrow, but to let them know that we have the capability when there is a need. Ensuring that message is clear, is important and we are taking our time in developing it. At the end of the day, I have to protect my suppliers, the banks. The messages we put out will messages that conservatives and contemporaries can both feel comfortable about endorsing.
(8) Do you have a long term plan for your company? In regards to merging with another company, expanding services, partnering with a team or agency.
We have an exciting long term plan that will greatly reduce the initial funding time for our loan requests and roll them into our affiliated banks. We won’t be partnering with any specific agencies as we don’t want to cannibalize our existing business which services many agencies. We like our lane and will continue to grow it vertically. The aggregate contracts of all of our Borrowers in the 4 major sports totals right around $1 Billion dollars at any giving point, so we have some exciting opportunities involving some of our depository institutions. There is a growing opportunity there and we are poised to capitalize.
(9) I asked you before about the obstacles you and your company face daily. What is the biggest reward for Sure Sports Lending?
The biggest reward for Sure Sports Lending is working with guys from that first pre-draft loan up until that second contract when a player is truly set for life. Take for an example, some of the young, Cuban born baseball players who signed big contracts, but had nothing and couldn’t get credit from any banks without utilizing Sure Sports Lending. We have done a lot of loans for those types of players. Now, years later, these guys are set for life. I’m glad they don’t need our services anymore, because they now have 7 and 8 figure liquidity positions and didn’t pay it all out in interest expenses. Their managers, and managers from all of the team sports, are still calling for the next guy coming up. That lets me know that our business is a long-term, sustainable benefit.