Source Capital Funding Inc. is a new business venture started in La Jolla by two locals, Sacha Ferrandi and Carl Maggio. With longtime college friend Patrick Hook, the three are the founding members of Source Capital Funding.
The business, located in the La Jolla Financial Building, 1200 Prospect St., Suite 150, opened its doors in January of this year.

Ferrandi outlined the nature of this new, vital business.

“We provide borrowers the funds they need, at fair terms and in a timely manner,” he said “Unfortunately, many borrowers don’t realize that they have legitimate, non-traditional options to get the funds they need.”

Source Capital Funding provides this type of non-traditional loan market.

“We are that option. If we perform, we know they will be repeat customers and refer us as a lender to other individuals who need private funds,” Ferrandi added.

Source Capital Funding is considered a hard money lender in that it lends money to investors who can’t secure traditional loans.

Ferrandi indicated that their main goal is to provide investors a solid return on their secured, short-term investment with individuals they can trust. The company wants to perform well up front and build a lifelong relationship with that customer.

“These individuals get a check in the mail every month, with the final balloon payment due at the end of the loan term,” Ferrandi said. “Word has spread fast for us from our initial investor base. These investors tell their friends, business colleagues, et cetera, about their experience with Source Capital and the returns they are getting.”

Trust deed investments “” in which the investors basically put up money for customers to secure a loan with “” receive returns between 12 and 16 percent. Ferrandi added this is a higher return than investors can obtain typically on traditional types of investments, such as stocks, bonds or mutual funds.

“We want to convey to borrowers and investors that we fund real estate projects that make good business sense,” he said. “We want repeat clients and the way to do that is by being fair, honest and delivering what we promise. It is not a sprint, it is a marathon, and we know we will be around for a long time.”

Ferrandi has a great story about a recent business transaction within the firm.

“We went to Palm Springs to meet a borrower and broker to talk about funding a commercial project,” he said. “We first scheduled to meet with the broker and, to our surprise, [he] had brought another individual along who was an expert in the Palm Springs real estate market.

“We ended up not funding the loan for the initial borrower but actually provided the individual we met a loan on a piece of land he also owned adjacent to his home. This land was owned free and clear and he wanted to use the equity in that property to do major improvements on his current home. The project made sense to us and we were able to fund within weeks.”

The 12- to 16-percent return on investment works in that a borrower will use property as collateral for the loan. This collateral is in the form of a deed of trust on the property, a special type of deed that is recorded in public records, where it tells everyone that there is a lien against a property.

“It is used in place of a mortgage,” Ferrandi said. “A deed of trust involves three parties: the trustor, the lender as the beneficiary, and a neutral third party as the trustee, who you can think of as someone who holds temporary, but not full, title until the lien is paid. The deed of trust is cancelled when the debt is paid. Until then, the trustee has the power to foreclose if the debt is not paid, without going through the court system, making it easier and quicker than foreclosing on a mortgage.”

A simple concept and practical.

“If our parameters are met, we present the project to an investor and explain all details of the project and terms,” Ferrandi said.

Then, when an investor agrees to fund, documents (the deed of trust, promissory note) are drawn up by a real estate lawyer and signed by the borrower.

“The funds are then wired from the investor to escrow and the loan is funded and documents recorded,” Ferrandi added. “The monthly payments are handled by a loan servicing company we contract and the borrower receives statements just like a mortgage or credit card. The only difference is the check is made to the investor.”

Source Capital Funding simply originates and facilitates the entire transaction, without handling of the cash aspects.
“Most hard money lenders, or private money as I like to call it, are primarily concerned with equity in the property, not the borrower’s financial status,” Ferrandi said. “We fund with investor capital based on our valuation of what the property is worth.” 

Source Capital Financial receives an origination fee from the borrower that is a percentage of the loan amount.
Ferrandi said that Source Capital Funding looks at anywhere from one to five projects per day.

“More often than not, the projects are not feasible because they do not meet our requirements,” he said. “The project must make sense. We must make sure that the property value, among other factors, meets our requirements. We must adhere to our lending guidelines. We could fund more projects but we are very careful with our decisions and investor money. Also, we always have a pipeline of projects we will likely fund in the future but are awaiting additional information or documentation from our borrowers.”

Recently, Source Capital was involved in securing investors and ultimately a loan for a woman who wanted to build on a lot near Yosemite National Park in Central California.

The deal was for the construction of a single-family dwelling and the woman needed to build a road to the property and do some vertical building.

“Banks typically do not lend on vacant land because it is too speculative and hard to underwrite something that doesn’t have a vertical structure on it,” Ferrandi said. “With homes, you can get comparable sale prices from other homes in the area and value the potential property the borrower wants a loan on. With land, it is not like that. Again, for banks, it all typically depends on the borrower’s credit score, financials, et cetera.”

In the end, Ferrandi said the biggest lesson the team learned was to be patient.

“We are so excited about our business but we understand that not all projects make sense at the end of the day,” he said.

Locating Source Capital in La Jolla was a natural move.

“We grew up here, have many ties to members of this community and have a positive reputation to maintain,” Ferrandi said. “We are excited about being a mainstay in the La Jolla business sector and plan on doing sound business for a long time. Our goal is to continue to provide borrowers with the funds they need and investors with solid, secured returns.

“We believe in doing business the traditional way. We know that when we talk to a client, whether it be a borrower or investor, that we will gain their confidence and trust because we are honest and professional. Business based on a firm handshake is alive and well.”

For information, call (858) 456-7444.