Issue No. 22

At Pier, we provide senior secured credit facilities to specialty finance companies, who use our capital to make loans, advances, receivables, or other contractual cashflows. These facilities are often under $20mm.  During the deal process, borrowers can rack up unnecessarily large legal fees if they’re not careful.

Big Law firms, accustomed to $100M+ deals, often let costs spiral—not just from higher rates, but from overcomplicating smaller transactions. A $15M facility can easily balloon to a six-figure legal bill, when the deal can absolutely get done in the $30K-$75K range. These smaller deals don’t need that level of intricacy — keeping terms and structure straightforward is critical.

Borrowers can use a big firm if they manage them tightly, curbing the tendency to over-engineer. Smaller firms, though, can often be a better fit, delivering proportional recommendations without excess. Letting Big Law treat your $15M deal like a billion dollar securitization is a big mistake. The fix? Pick a firm that scales to the deal—or keep the big one on a short leash. Precious operating capital is better used bolstering the operations and credit team.

And yes, we do have the “worst offenders” list of law firms who overcomplicate these smaller facilities…

- Jillian

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Imagine you’re the CEO of a specialty finance lender. Here's how a revolving credit facility with an 80% advance rate typically works. You take $1MM of your equity capital and make loans with it. You then put these loans in the credit facility SPV. Your lender looks at that $1 million portfolio and says, “Great, your borrowing base is $1 million.” That means you can borrow up to 80% of it—or $800,000.

So, you draw that $800,000 and use it to issue more loans. Now your portfolio grows to $1.8 million in total loans. But here’s the catch: you’ve only borrowed $800,000 against it, giving you an effective loan-to-value (LTV) ratio of 44% ($800k ÷ $1.8MM). To get there, you still had to front $1 million of your own cash—not exactly the leverage you might expect from an “80% advance rate.”

At first glance, you might think an 80% advance rate means you’d only need $360,000 of your own money to originate $1.8 million in loans. But that’s not how it plays out initially.  Rinse and repeat. Each cycle lets you draw smaller amounts, inching closer to that 80% LTV you thought was the starting point. It works, but it’s a slow grind—and it ties up more of your equity capital than you might like upfront.

Here’s how we do it: You pledge $200,000 in assets—cash or loans—and we’ll lend you $800,000 against it, assuming an 80% advance rate. Boom—you’re at an 80% LTV from day one.

Take that $800,000, add your $200,000, and issue $1 million in new loans. Want to grow? Pledge another $200,000 in assets, draw another $800,000, and repeat. To originate $1.8 million in loans with us, you’d only need $360,000 of your own cash—way less than the $1 million required in the traditional setup.

Our approach cuts the equity burden and lets early-stage lenders scale at a pace that makes sense. Less capital tied up, more flexibility to grow.

- Conor

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