Beware of Bogus Commitment Letters

Beware of Bogus Commitment LettersRecently I have been deluged with prospects presenting bogus commitment letters. Just in the last six months I have seen over 100. These letters are from people that obviously don’t have the slightest idea of what structured finance is all about. In addition and in almost every case the mere issuance of the letter is illegal and unlawful.

Two Common Denominators

I have spoken before about commitment letters. I emphasized why a letter may not go to fruition. Also it is people behind the commitment letter and not just banks or semi-regulated lenders. In the cases where I have seen the bogus letter I have noticed two common denominators.

  1. The language is not correct. It looks like it was written by a person without any clue as to the proper legal language that should be included in such a document.
  2. Second, it is written by a source that is either not properly licensed, or for that matter duly authorized to issue a letter of this kind.

Due Diligence is Critical

After you have a chance to do your due diligence you will find that they have no wherewithal insofar as cash, capital or capability to finance a used car let alone provide multi-million dollar commitments.

Due diligence is critical. In talking with the source that has or is about to issue this bogus letter it will be apparent that they are not the real deal. Look for these warning signs:

  1. If they do not care to share the successes of their past that is clue one.
  2. If they do not have the proper licensure that is clue two.
  3. If they seem just to be using the words of the financial insider lexicon without proper placement then  that is clue 3 – you have a bogus banker.

I  explain in more detail what to look out for in the video below
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So in closing be careful and pay attention. These letters and the people that issue them are everywhere. They can’t do what they say and for that matter they know nothing of what they speak. Do your due diligence.

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George Lovato, Jr. is President and Principal of BH Capital Ltd., Merchant Banker, Consultant, Author and Lecturer. Happily married for over 30 years to his childhood sweetheart Gale, they live nestled in the shadows of the Sandia Mountains in Albuquerque with their six hounds.

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