After opening a new private equity fund, Inland Capital Fund A, just under one year ago, Spokane-based private money lender Inland Capital LLC has raised $10.5 million for the fund, says Aaron Cunningham, CEO and co-founder of the company.

An additional $10.5 million has been added to the company’s lending pool through credit facilities from Inland Northwest Bank, bringing total assets to $21 million, says Cunningham. 

At the end of June 2017, Inland Capital rolled over all of its previous portfolios into that $10.5 million investment fund, he says. Before they launched Inland Capital Fund A, Cunningham and company co-founder John Urquhart financed loans with their own private capital.

Now, all loans are sourced from that $21 million lending pool. So far, Inland Capital has issued roughly 200 loans in the past 12 months, or about $30 million in total loan volume, says Cunningham.

The company’s average loan duration is just over seven months, he says, even though many loans are originated with 12-month terms. Because of that short duration, the private money lender managed to issue a substantially higher loan volume than its actual lending pool.

Inland Capital Fund A aims to pool investors’ money to lend to others to purchase distressed real estate, he says. 

“We’ve ramped up production, deleveraged our portfolio, and we’re sending out an announcement to our investors that we’re extending that fund offering through June 30 of (2019),” he says.

Headquartered on the third floor of the 1889 Building, at 120 N. Stevens, Inland Capital has seven full-time employees, says Cunningham. The company occupies about 1,100 square feet of space on the 3,000-square-foot top floor. He says the company is considering bringing on an employee dedicated to managing investor relationships.

Almost all of the loans issued from the fund go toward residential investments, with less than 1 percent being issued for commercial real estate projects, Cunningham says.

About three-quarters of Inland Capital’s clients are real estate “flippers” who purchase distressed real estate, fix up the properties, and resell them at higher values, says Cunningham. Other borrowers use Inland Capital loans like bridge loans to build up their rental portfolios, he says.

Inland Capital only loans to borrowers who plan to invest in real estate, says Cunningham.

Although Inland Capital stated on its private placement memorandum that it hopes to raise up to $50 million, Cunningham says the company didn’t expect to raise that much.

“I think we’re going to hit somewhere near $20 million (in private investor contributions), and we’re going to raise that over the remaining 12 months that we have the fund open,” he says.

He declines to disclose the fund investors’ identities. 

When the company first launched the fund, Cunningham says he projected around $12.5 million to $15 million from private investors by this time.

One reason it didn’t hit that target was the thriving stock market.

“People who we thought would like to invest have been harder to convert, because they’ve been seeing growth in their traditional investments,” says Cunningham.

He also says the fund was a new business concept to Urquhart and him, so they weren’t sure what to expect. 

“Knowing where we’d be today was a little bit difficult,” he says.

Regardless, Cunningham says the fund so far has been successful. To Inland Capital, Cunningham says success is more than an immediate dollar amount.

Success “looks like building a business that has longevity, not only for us but also for the people investing money with our fund, and also building relationships with borrows that last a long time,” he says. 

Inland Capital maintains a high borrower retention rate, asserts Cunningham. About 75 percent of borrowers this month have borrowed through the company previously. 

The private money lender, also commonly known as a hard money lender, started in 2008, says Cunningham. From 2008 through 2016, Cunningham estimates the company’s lending has grown 40 percent. It racked up a total loan volume of about $30 million last year. Loan volume growth stabilized at about $30 million in 2017 and is projected to rise to about $35 million for 2018. 

Roughly 65 percent of loans are issued for Western Washington investments. About 10 percent to 15 percent of loans are issued for Spokane investments, and the remainder are issued for investments throughout North Idaho, Boise, and the Portland area.

Cunningham says working for Inland Capital is his primary occupation, but he’s also involved with other businesses. He also co-owns the real estate companies Citibrokers LLC and Movsi LLC, as well as other real estate holding businesses.