AMENDMENT NO. 4
TO
FORM S-11
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

Falcon Financial Investment Trust
(Exact Name of Registrant as Specified in Governing Instruments)

15 Commerce Road
Stamford, CT 06902
(203) 967-0000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

David A. Karp
President
Falcon Financial Investment Trust
15 Commerce Road
Stamford, CT 06902
(203) 967-0000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)

Copies to:
J. Warren Gorrell, Jr., Esq. Stuart A. Barr, Esq. HOGAN & HARTSON L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004-1109 (202) 637-5600		Daniel M. LeBey, Esq. HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 E. Byrd Street Richmond, VA 23219 (804) 788-8200

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed or supplemented. We cannot sell any of the securities described in this prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell the securities, nor is it a solicitation of an offer to buy the securities, in any state where an offer or sale of the securities is not permitted.

We are a fully integrated, self-advised, internally-managed specialty finance company focused solely on the business of originating and servicing loans to automotive dealers in the United States. Following this offering, we intend to operate so as to qualify as a real estate investment trust, or REIT, for federal income tax purposes.

This is our initial public offering. No public market currently exists for our common shares. We are selling all of the common shares offered by this prospectus. We currently expect the public offering price to be between $9.00 and $11.00 per share. Our common shares have been approved for quotation on The Nasdaq National Market under the symbol "FLCN."

Investing in our common shares involves risks. See "Risk Factors" beginning on page 9 of this prospectus for some risks regarding an investment in our common shares, including:

We expect to use approximately $89.7 million in the aggregate, or 78.4% of the anticipated net proceeds from this offering, based upon an assumed initial public offering price of $10.00 per share, which is the mid-point of the range set forth above, and after deducting estimated underwriting discounts and estimated offering expenses payable by us, to repay outstanding indebtedness owed to or guaranteed by SunAmerica Life Insurance Company, Goldman Sachs Mortgage Company and Falcon Auto Venture, LLC (our chief executive officer and president are its managing members), each of which were founding members and are unitholders of Falcon Financial, LLC. In connection with the merger of Falcon Financial, LLC with and into Falcon Financial Investment Trust immediately prior to the closing of this offering, we intend to issue $12.9 million, or 9.1% of our common shares to be outstanding immediately after this offering, to Falcon Financial, LLC unitholders.

The underwriters may also purchase up to 1,875,000 common shares from us at the public offering price, less the underwriting discount, within 30 days after the date of this prospectus to cover over-allotments, if any.

At our request, the underwriters have reserved up to 1% of the common shares in this offering to be for sale at the public offering price to persons who are trustees, officers or employees or who are otherwise associated with our company through a directed share program.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

No dealer, salesperson or other individual has been authorized to give any information or make any representations not contained in this prospectus in connection with the offering made by this prospectus. If given or made, such information or representations must not be relied upon as having been authorized by us or any of the underwriters. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of our securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has not been any change in the facts set forth in this prospectus or in the affairs of our company since the date hereof.


Summary
Risk Factors
Special Note Regarding Forward-Looking Statements
Market Data
Use of Proceeds
Distribution Policy
Capitalization
Dilution
Our Structure and Formation Transaction
Selected Financial and Other Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Our Company
Management
Certain Relationships and Related Transactions
Principal Shareholders
Description of Shares
Shares Eligible for Future Sale
Material Federal Income Tax Considerations
Underwriting
Legal Matters
Experts
Change of Independent Public Accountants
Where You Can Find More Information
Index to Financial Statements

You should rely only on the information contained in this prospectus or to which we have referred you. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus.

This is only a summary and does not contain all of the information that you should consider before investing in our common shares. You should read the entire prospectus, including "Risk Factors" and our financial statements and related notes appearing elsewhere in this prospectus, before deciding to invest in our common shares. In this prospectus, unless the context suggests otherwise, references to "our company," "we," "us" and "our" mean Falcon Financial Investment Trust, including its subsidiaries and Falcon Financial, LLC, its predecessor and its subsidiaries. Unless indicated otherwise, the information included in this prospectus assumes no exercise by the underwriters of the over-allotment option to purchase up to an additional 1,875,000 common shares, and that the common shares to be sold in this offering are sold at $10.00 per share, which is the midpoint of the range indicated on the front cover of this prospectus.

We are a fully integrated, self-advised, internally-managed specialty finance company focused solely on the business of originating and servicing loans to automotive dealers in the United States. Many automotive dealers require capital for a variety of purposes, including the acquisition of other dealerships, the acquisition of dealership real estate, facility expansion and renovations, partner buyouts and refinancing of existing debt. Because other providers of long-term debt financing to automotive dealers traditionally have provided long term financing only to dealers that already have obtained from that provider financing of the dealer's new and used automobile inventory, we believe we are the only dedicated provider of long-term debt financing to automotive dealers in the United States.

We provide loans to automotive dealers based on their cash flow, collateralized by their real estate assets and business assets, including automobile parts and equipment and intangible property but not automobile inventory and certain other personal property. Historically, the value of the real estate collateral and business asset collateral together has exceeded the principal amount of the loans we originate. For our loan portfolio as of September 30, 2003, the value of the real estate collateral represented 82.1% of the outstanding principal amount of the loans and the value of the business asset collateral represented 80.0% of the outstanding principal amount of the loans, which together represent 162.1% of the outstanding principal amount of the loans in our loan portfolio. To date, our product offering has been limited to long-term, fixed-rate loans generally under $15 million. Following this offering, we intend to expand our loan product offerings and expect that we will be able to significantly expand our loan originations volume based on the credible and recognizable brand image we believe we have created among automotive dealers through our extensive advertising and marketing efforts.

Since the closing of our first loan in February 1998 through September 30, 2003, we have originated 107 loans totaling approximately $640 million in aggregate initial principal amount. For the fiscal year ended September 30, 2003, we originated 17 loans totaling $147.1 million in aggregate initial principal amount and, as of September 30, 2003, our portfolio consisted of 14 loans with an aggregate outstanding principal balance of $105.9 million, and we had $28.2 million in outstanding loan commitments. As of the date of this prospectus, we have funded $22.8 million of the loan commitments outstanding as of September 30, 2003. Our portfolio of 14 loans as of September 30, 2003 had an average principal amount outstanding of $7.6 million, a weighted-average remaining term of 175.7 months, a weighted-average interest rate of 8.96%, a weighted-average loan to realty value of 121.8% and a weighted-average loan to value of 61.3%. We have had a strong credit performance and experienced only two loan delinquencies since our inception, one of which related to a loan in our 2001 securitization that defaulted in March 2002 and resulted in a loss of principal of $2.8 million. The second loan delinquency relates to a loan in our 2003 securitization with an unpaid principal balance of $9.5 million that defaulted in September 2003. Although the second loan delinquency is not yet resolved, we have estimated the loss upon the resolution of this loan may range from $3.0 million to $3.5 million. Correspondingly, we have taken a charge of $0.4 million, which reflects our assessment of the reduction in value of our retained interest relating to estimated resolution of this loan. We cannot

provide any assurance that the loss will fall within the range indicated. We believe that our strong credit performance has resulted from our disciplined and thorough underwriting of each loan.

After this offering, we expect to fund our business with a new warehouse credit line, securitization transactions and equity. Historically, our securitizations have been structured as off-balance sheet transactions, and therefore we have recorded gain on sale in connection with each securitization. Following completion of this offering, we expect to structure our securitizations as on-balance sheet secured financings, and therefore do not expect to record any gain on sale in connection with future securitizations.

We have successfully securitized four pools of our loans in 1999, 2000, 2001 and 2003 totaling $517.0 million in aggregate principal amount at the date of securitization, and we continue to provide primary servicing for all of our securitized loans. We believe that our successful securitization track record enhances our ability to access the bond market for long-term non-recourse financing. Securitization is a highly effective source of funding because it allows us to match the maturity of our loan assets with the maturity of our debt.

All of our securitizations received ratings from two nationally recognized statistical ratings organizations, Moody's Investors Service and Fitch Ratings (formerly known as Duff & Phelps). One of our securitizations, the 2003 securitization, has received a rating downgrade as a result of the September 2003 loan delinquency. In October 2003, Moody's downgraded the Class A-1 and A-2 certificates in our 2003 securitization from Aaa to Aa1, the Class B certificates from Aa2 to Aa3, the Class C certificates from A2 to A3, the Class D certificates from Baa2 to Baa3, the Class E certificates from Ba2 to Ba3, and the Class F certificates from B3 to Caa2. Recently, Moody's further downgraded the Class A-1 and A-2 certificates in this securitization from Aa1 to Aa2, the Class B certificates from Aa3 to A1, the Class C certificates from A3 to Baa1, the Class D certificates from Baa3 to Ba1, the Class E certificates from Ba3 to B3, and the Class F certificates from Caa2 to Caa3. Fitch Ratings recently downgraded the Class E certificates in this securitization from BB to B+ and the Class F certificates from B to CCC. Additionally, Fitch Ratings placed the Class B, C, D, E and F certificates on rating watch for potential downgrade. Fitch Ratings affirmed the Class A certificates at AAA.

Automotive retailing, with 2002 industry sales of approximately $817 billion, is the largest consumer retail market in the United States. There were over 21,700 automotive dealers in the United States as of December 31, 2002. Automotive dealers accounted for all of the $405 billion of 2002 new vehicle sales, approximately 76% of the $257 billion of 2002 used vehicle sales and approximately 52% of the $155 billion of 2002 parts and service sales.

We believe capital requirements to operate automotive dealerships will continue to increase as many owners who were granted franchises in the 1950s and 1960s approach retirement age and are seeking exit opportunities, manufacturers impose ever greater facility requirements on automotive dealers, and dealers enhance their competitive position and ability to achieve economies of scale through acquisition strategies. Our experience indicates that the key factors in successfully lending to automotive dealers include providing a differentiated loan product with loan amounts based on cash flow as well as providing a full range of traditional real estate mortgage loans based on a dealership's real estate value, and maintaining a highly-specialized lending group with the knowledge and expertise to underwrite the creditworthiness of automotive dealers.

We believe we are able to execute our approach successfully as a result of five core strengths:

You should carefully consider the matters discussed in the section "Risk Factors" beginning on page 9 prior to deciding whether to invest in our common shares. Some of these risks include:

Due to limitations on the concentration of ownership of REIT shares imposed by the Internal Revenue Code, our declaration of trust generally will prohibit any shareholder from actually or constructively owning more than 9.8% of our outstanding common shares. Although the law on the matter is unclear, a tax might be imposed on us if our shares are held by certain governmental entities, certain tax exempt organizations exempt from the unrelated business income tax and certain cooperatives. Therefore, our declaration of trust will prohibit these entities from owning our shares. Our board may, in its sole discretion, waive the ownership limits and restrictions with respect to a particular shareholder if our board is presented with evidence satisfactory to it that the ownership will not then or in the future jeopardize our status as a REIT or subject us to tax.

We intend to elect to be treated as a REIT for federal income tax purposes in connection with the closing of this offering. Federal income tax law requires that a REIT distribute with respect to each

year at least 90% of its REIT taxable income. For more information, please see "Material Federal Income Tax Considerations—Our Taxation as a REIT" beginning on page 105.

To satisfy the requirements to qualify as a REIT, and to avoid paying tax on our income, we intend to make regular quarterly distributions of all, or substantially all, of our REIT taxable income to holders of our common shares. Any future distributions we make will be at the discretion of our board of trustees and will depend upon, among other things, our actual results of operations. Our actual results of operations and our ability to pay distributions will be affected by a number of factors, including the revenue we receive from our loans, our operating expenses, the ability of our customers to meet their loan payment obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see "Risk Factors" beginning on page 9.

Immediately prior to the closing of this offering, Falcon Financial, LLC, which was organized in Delaware in 1997, will merge with and into Falcon Financial Investment Trust, a newly formed Maryland real estate investment trust. Upon the closing of this offering, our ownership structure will be as follows:

In addition, we have reserved for future issuance under our equity incentive plan 407,358 common shares.

We were formed as a real estate investment trust in Maryland in August 2003 and, immediately before the closing of this offering, we will become the successor to Falcon Financial, LLC, which was organized in Delaware in 1997. Our principal executive office is located at 15 Commerce Road, Stamford, CT 06902. Our telephone number is (203) 967-0000. Our Web address is
http://www.falconfinancial.com. The information on our web site does not constitute a part of this prospectus.

We intend to elect to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code in connection with the closing of this offering. Our qualification as a REIT depends upon our ability to meet on a continuing basis, through actual annual (or in some cases, quarterly) operating results, various complex requirements under the Internal Revenue Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our shares. We believe that we will be organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, and that our intended manner of operation will enable our company to meet the requirements for taxation as a REIT for federal income tax purposes after completion of this offering. In connection with our election to be taxed as a REIT, we anticipate we will have a fiscal year ending on December 31, as opposed to a fiscal year ending on September 30, which was used by our predecessor, Falcon Financial, LLC.

As a REIT, we generally will not be subject to federal income tax on REIT taxable income that we will distribute to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income and property, and our taxable REIT subsidiary that engages in the origination and servicing of loans will be subject to federal, state and local income tax.

You should read the following summary historical financial and operating data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes included elsewhere in this prospectus. The financial statements as of September 30, 2003 and 2002 and for each of the years in the three year period ended September 30, 2003 and as of September 30, 1999 and for the year then ended have been audited by KPMG LLP. The financial statements as of September 30, 2000 and for the year then ended have been audited by Arthur Andersen LLP. In 2002, we dismissed our independent public accountants, Arthur Andersen LLP, and retained KPMG LLP to act as our independent auditors. We had previously retained KPMG LLP as our auditors since our inception in 1997 through to 1999, when we dismissed KPMG LLP and subsequently engaged Arthur Andersen LLP. The financial statements of our predecessor, Falcon Financial, LLC, have been prepared in accordance with accounting principles generally accepted in the United States. We derived the historical financial data for our predecessor, Falcon Financial, LLC, for each of the five fiscal years in the period ended September 30, 2003 from our predecessor's audited financial statements. Our historical results are not necessarily indicative of our results for any future period.

Historically, we have derived revenues from gain on the sale of loans that we held and pooled for securitization because those transactions were structured as off-balance sheet transactions, as described below under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements" beginning on page 40. Following completion of this offering, however, we currently intend to structure our securitizations as on-balance sheet secured financings, and therefore do not expect to record any gain on sale in connection with future securitizations. In connection with our election to be taxed as a REIT after the completion of this offering, we anticipate we will have a fiscal year ending on December 31, as opposed to September 30.

You should carefully consider the risks described below before making an investment decision. Investing in our common shares involves a high degree of risk. Any of the following factors could harm our business and future results of operations and could result in a partial or complete loss of your investment.

Approximately $20 million of the anticipated net proceeds from this offering have been allocated to originate future loans, which have not been identified and ultimately may not perform as anticipated.

We have allocated approximately $20 million of the anticipated net proceeds from this offering to originate future loans to automotive dealers but have not yet identified all of those investments. To the extent we have not yet identified such loans, you will be relying on our credit committee to approve loans of adequate credit quality. If we invest those proceeds to fund loans that suffer performance problems, our future results could suffer and you could lose money on your investment.

Our exclusive focus on lending to automotive dealers could impair our revenues and operating results if automotive dealers experience economic difficulties.

Since our inception, we have focused exclusively on providing loans to automotive and select motorcycle dealers. A material reduction in consumer demand for new automobiles may cause dealerships to suffer losses and weaken their financial condition. Various factors, many of which are beyond the control of any particular automotive dealer, may affect the economic viability of a dealer and its ability to make loan payments to us, including:

If the automotive retail industry were to experience economic difficulties, the risk of defaults by our customers or delays in payments may increase. As a result, the overall timing and amount of collections on our loans may differ from what we expected and result in material harm to our revenues, net income and assets.

The value of the real estate securing our loan portfolio as of September 30, 2003 was 82.1% of the principal amount of the loan portfolio on a weighted-average basis and, consequently, if any of these loans becomes non-performing and we are required to foreclose, we could suffer a loss exceeding that which would have been incurred had the loan been secured 100% by real estate.

We historically have made and expect to continue to make loans to automotive dealers based upon cash flow and secured by the combined value of the dealer's interest in the real estate plus goodwill and tangible net worth or business enterprise value of the dealership. As a result, the loan amount of most of our loans exceeds the value of the dealer's real estate. As of September 30, 2003, the weighted average loan to real estate value of the loans in our portfolio was 121.80%. The collateral securing our loans also could lose value as a result of, among other things:

Any one or more of the preceding factors could materially impair the value of the collateral securing our loan and harm our ability to recover principal in a foreclosure of the loan. In addition, because real estate is relatively illiquid, if we foreclose on collateral, our ability to recover the principal amount of the loan may be delayed and/or limited.

While most of our loans are also secured by a lien on specified business assets of the dealer including automobile parts and equipment and intangible property but not the dealership's automobile inventory, we cannot assure you that the business asset collateral securing any particular loan will protect us from suffering a partial or complete loss if the loan becomes non-performing and we seek to foreclose on the collateral. For our loan portfolio as of September 30, 2003, the value of the business asset collateral represented 80.0% of the outstanding principal amount of the loans.

In the event of a default on any loan, we cannot assure you as to the price at which the related automotive dealership assets will be able to be sold. This price may be substantially less than the value of such assets at the time of origination of the loan because, among other things, the circumstances leading to any default may substantially impair the value of the related dealership assets. As a result, the risk of non-recovery may be high on the loans we make, and we may be unable to recover all amounts due on loans upon default.

As we expand our loan product offerings, we expect to face significant competition from traditional banks and other competitors that have substantially greater resources than we do, which could harm our growth prospects.

As we expand our loan product offerings to include traditional real estate mortgage loans, we expect to compete more directly with banks, the finance affiliates of automobile manufacturers and other lenders. Many of these competitors may have substantially greater financial, technical, marketing and distribution resources than we do. Several of these competitors also may have greater name

recognition and more established relationships with our target customers. To the extent we face intense competition in our effort to expand our loan products, we may be required to adjust the pricing terms of our loans, which would reduce our profitability on such loans, or we may fail to successfully penetrate these markets, which would harm our growth prospects.

If we fail to effectively manage our expanded loan product offerings, our operating results could be adversely affected.

We intend to significantly expand our loan product offerings following completion of this offering. Our expected growth may place a strain on our loan origination and loan management systems and resources. We must continue to refine and expand our access to financing sources, management procedures, marketing capabilities and our technology. As we grow, we expect to hire a significant number of new employees, whom we must train, supervise and manage effectively. We may not be able to hire and train sufficient lending personnel with knowledge of the automotive retailing industry or develop management and operating systems to manage our expansion effectively. If we do not manage our growth successfully, our operations and financial results could be harmed.

Our limited operating history with respect to our new products limits your ability to evaluate our business and growth prospects, which may increase your investment risk.

To date, we have offered only our cash flow-based loan product. Integral to our business strategy is our ability to expand our loan product offerings to include variable-rate and traditional real estate mortgage loans, for which we do not have any operating experience. Because of this limited operating history, we may not be able to:

Following completion of this offering, our operating results may fluctuate significantly, and we may not realize the growth opportunities for our new loan product offerings as quickly as we currently expect. Because of our expansion plans, our historical operating results are not likely to be indicative of our performance in future reporting periods.

We face risks as a result of manufacturer restrictions imposed upon automotive dealers and the ability of manufacturers in certain situations to terminate dealership franchises.

We face risks associated with providing loans to automotive dealers that may not be associated with commercial loans made to independent enterprises. Automotive dealers typically operate their dealership pursuant to a written sales and service agreement with the applicable manufacturer. These sales and service agreements typically do not contain provisions protective of lenders. A manufacturer may terminate a dealer's rights under a sales and service agreement without informing us as a lender. To the extent that we acquire title to a site that had been operated as an automotive dealership, through foreclosure or similar proceedings, we may be restricted in the use of such site or may be unable to succeed to the rights of the automotive dealer under the related sales and service agreement. The transferability of a sales and service agreement otherwise may be restricted. Under federal and state franchise regulations, the transfer of a franchise acquired through foreclosure or similar proceedings may require registration with governmental authorities or disclosure to prospective transferees, which may also limit or delay our ability to succeed to the rights of the automotive dealer under the sales and service agreement. These factors may have an adverse effect on our ability to

mitigate losses arising from a default on loans we originate to owners of automotive dealerships that are part of a franchise system.

Any refusal of automobile manufacturers to approve specific acquisitions of dealerships may decrease demand for our loan products, which would harm our growth prospects.

Demand for our cash flow-based loan products depends to a significant extent upon automotive dealers seeking to acquire additional dealerships to take advantage of consolidation opportunities. With respect to acquisition of dealerships, each sales and service agreement typically contains provisions requiring the manufacturer's prior approval of any changes in the management or transfer of ownership of the dealership. Although manufacturers generally are required under applicable state laws to act reasonably in consenting to transfers of ownership, we cannot assure you that manufacturers will continue to approve specific transactions proposed by prospective customers in the future. For example, manufacturers may disapprove of the capital structure, experience or performance history of a potential buyer of a dealership and consequently refuse to approve the acquisition. To the extent that manufacturers fail to approve proposed dealership acquisitions, demand for our cash flow-based loan product may be reduced, which would harm our growth prospects.

Our concentration of loans to a very limited number of automotive dealers subjects us to the risk of material harm to our operating results and financial condition if one or more of our customers enters into bankruptcy or delays their loan payments.

At any time, one or more of our customers may experience a downturn in their business that results in their failure to make loan payments when due, or to declare bankruptcy. As of September 30, 2003, our loan portfolio consisted of 14 loans, and our largest customer accounted for 17.2% of the outstanding balance of our loan portfolio. In the future, we expect our portfolio of loans to increase as we originate additional loans, particularly in light of our intention to structure our future securitizations as on-balance sheet financings. As a result of this concentration of loans, we are subject to the risk of material harm to our operating results and financial condition if a single customer fails to timely make its loan payments or defaults on its loan.

Our portfolio of loans historically has been concentrated in specific geographic regions and any adverse market or economic conditions in those regions may have a disproportionately adverse effect on the ability of our customers to make their loan payments.

From time to time, our portfolio of loans has been and may in the future be concentrated in specific geographic regions. For example, approximately 20.5% of the aggregate principal balance of loans we sold in our February 2003 securitization was originated with dealers located in Texas. Adverse market or economic conditions in a particular region may disproportionately increase the risk that dealers in that region are unable to make their loan payments. In addition, the market value of the real estate securing those loans could be adversely affected by adverse market and economic conditions in those regions. If, as a result of adverse regional economic conditions, one or more of our customers defaults on a loan, we may not recover our full investment in the loan, which would harm our operating results and financial condition.

We may not possess all of the material information relating to a dealer at or following the time we make a credit decision, which may cause us to incur losses on one or more of our loans.

We lend primarily to privately-owned automotive dealers for whom there is generally no publicly available information. We therefore must rely upon the due diligence efforts of our employees and consultants to obtain the information required to make successful credit decisions. To a significant extent, our employees and consultants depend and rely upon dealership management to provide full and accurate disclosure of material information concerning their business, financial condition and prospects. In particular, this risk is increased because we lend to automotive dealers based upon the

franchise value of the dealership. If we do not have access to all of the material information about a particular dealership's business, financial condition or prospects or if a dealership's accounting records are poorly maintained or organized, we may not make a fully informed credit decision and/or may not be able to monitor our borrowers properly, each of which could result in losses and harm our operating results. On February 3, 2003, a dealership to which we made a loan filed a lawsuit against DaimlerChrysler Services North America LLC, its floorplan lender, as part of a dispute with DaimlerChrysler that initially arose in connection with another dealership owned by the same dealer. This dispute ultimately led to the dealer failing to make loan payments beginning in August 2003. DaimlerChrysler has repossessed the vehicle inventory from the dealership, terminated its floorplan facility and one of DaimlerChrysler's affiliates has served notice to terminate the dealer's franchise.

We were not aware of the dispute that led to the lawsuit in the course of our loan servicing and monitoring from the time the loan was made in October 2001, and we did not discover the existence of the lawsuit until July 2003, immediately prior to when the loan first became delinquent. We had sold this loan, which has an unpaid principal balance of $9.5 million and defaulted in September 2003, in our 2003 securitization on February 3, 2003. Although this loan delinquency is not yet resolved, we have estimated the loss upon the resolution of this loan may range from $3.0 million to $3.5 million. Correspondingly, we have taken a charge of $0.4 million, which reflects our assessment of the reduction in value of our retained interest relating to estimated resolution of this loan. We cannot provide any assurance that the loss will fall within the range indicated. Upon review of this loan default, Moody's downgraded the Class A-1 and A-2 certificates in our 2003 securitization from Aaa to Aa1, the Class B certificates from Aa2 to Aa3, the Class C certificates from A2 to A3, the Class D certificates from Baa2 to Baa3, the Class E certificates from Ba2 to Ba3, and the Class F certificates from B3 to Caa2. Recently, Moody's further downgraded the Class A-1 and A-2 certificates in this securitization from Aa1 to Aa2, the Class B certificates from Aa3 to A1, the Class C certificates from A3 to Baa1, the Class D certificates from Baa3 to Ba1, the Class E certificates from Ba3 to B3, and the Class F certificates from Caa2 to Caa3. Fitch Ratings recently downgraded the Class E certificates in this securitization from BB to B+ and the Class F certificates from B to CCC. Additionally, Fitch Ratings placed the Class B, C, D, E and F certificates on rating watch for potential downgrade.

Fitch Ratings recently downgraded certain certificates in our 2003 securitization to "CCC," denoting high default risk, which could adversely affect our ability to complete additional securitizations in the future.

As a result of a delinquency relating to a loan with an unpaid principal balance of $9.5 million that was sold in our 2003 securitization, Fitch Ratings, which rates the certificates sold in our securitizations, downgraded the Class F certificates in this securitization to "CCC." This rating indicates a high default risk. Such a rating may adversely affect our ability to complete additional securitizations, which are an important source of our funding.

Since our inception in 1997, we have suffered one credit loss as a result of what we believe was fraud. The efforts of a dealer to defraud us when making a credit decision may cause us to make loans that we otherwise would not fund and ultimately to suffer losses on our loans. In addition, we may be unable to recognize or act upon an operational or financial problem of a dealer if the dealer fails to accurately report its financial condition, or its compliance with loan covenants. Losses could also arise if any of our employees were dishonest. For example, a dishonest employee could collude with a dealer to misrepresent the creditworthiness of such dealer or to provide inaccurate reports regarding an existing customer's compliance with its loan covenants. As a result of dealer and/or employee fraud, we could lose some or all of the principal of a particular loan or we could fail to act in a timely manner to recover our investment.

We may make errors in evaluating accurate information reported by our customers, which could cause us to make loans that we would not have otherwise made and could result in losses.

Our underwriting group evaluates loans based on detailed financial information provided to us by automotive dealers. Even if these dealers provide us with full and accurate disclosure of all material information concerning their businesses, our underwriting group and credit committee members may misinterpret or incorrectly analyze this information. Mistakes by our underwriting staff and credit committee may cause us to make loans that we would not have otherwise made and ultimately result in losses on one or more of our loans.

Our balloon loans may involve a greater degree of risk than our fully amortized loans, and the failure of a customer to repay the remaining principal balance upon the maturity date could harm our operating results.

As of September 30, 2003, one of our loans, representing approximately 6.0% of the outstanding balance of our loan portfolio, was a balloon loan. A balloon loan is a term loan with a series of scheduled payment installments calculated to amortize the principal balance of the loan so that upon maturity of the loan more than 25%, but less than 100%, of the loan balance remains unpaid and must be satisfied. We limit the amount due upon the maturity of any balloon loan to 75% of the appraised value of the real estate collateral at the time we originate the loan. We may enter into additional balloon loans in the future. We cannot assure you that our customers will be able to make required balloon payments at maturity and accordingly, we may not recover some or all of our investments in these loans. Dealers' ability to repay balloon payments amounts may depend upon their ability to refinance their loan or to sell the property securing their loan at a price sufficient to permit repayment, which could be affected by factors such as the availability of, and competition for, credit, prevailing interest rates, the fair market value of the property, the dealer's financial condition, and general and regional economic conditions. Balloon payment loans expose us to risk of greater loss if a dealer fails to make the balloon payment.

The loss of any of our key executives, including one or more members of our credit committee, could prohibit us from borrowing further under our warehouse credit line and materially disrupt our business and harm our operating results.

Our future success depends to a significant extent on the continued services of our chief executive officer, our president and our chief credit officer, who collectively comprise our credit committee. These three individuals are directly responsible for all of our credit approval decisions. Moreover, the industry experience and the extent and nature of the relationships our key executives have developed with automotive dealers as current and potential borrowers and with investment banks and other institutional investors as potential partners and investors in securitization transactions are critically important to the success of our business. In particular, if either Mr. Schwartz or Mr. Karp ceases to be employed by us as an executive officer for any reason other than death, disability or incapacity, we will be prohibited from making additional borrowings under our warehouse credit line. Although we have entered into employment agreements with our chief executive officer, president and chief credit officer, there is no guarantee that any of them will remain employed with our company for the term of or following the expiration of their respective agreements. If any of our key executives were to die, become disabled or otherwise leave our employ, we may not be able to replace him with an executive officer of equal skill, ability and industry expertise. The performance of our management, particularly our credit committee, which is critical to the operation of our business, may be impaired without the continued services of one of these executive officers.

Hedging against our interest rate exposure may materially reduce our earnings.

In connection with the underwriting of our loans, we generally enter into transactions to mitigate the effect that changes in interest rates and credit spreads have on the fair value of our fixed-rate loan

portfolio, including short sales and purchases, securities resale and repurchase agreements and interest rate swaps. We generally short U.S. Treasury securities and invest the proceeds in repurchase agreements with Goldman, Sachs & Co. with U.S. Treasury notes as the underlying securities. In swap transactions, we generally enter into an interest rate swap contract, receiving a variable rate of interest and paying a fixed rate of interest. As of September 30, 2003, we had entered into two interest rate swap contracts with Goldman, Sachs & Co. having a total notional value of $70.0 million and a total fair value of $(0.4) million.

In the future, we may enter into other repurchase agreements, short sales and interest rate swap agreements. Interest rate hedging may fail to protect or may adversely affect us and the failure to adequately hedge interest rates and credit spreads could harm our results of operations.

Interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates, which could harm our operating results.

During periods of rising and volatile interest rates, there is a higher demand for hedging transactions as parties seek to mitigate the risks associated with the interest rate environment. A greater demand for hedging transactions makes entering into such transactions more expensive, even though the potential benefits of hedging remain relatively constant. To the extent more parties seek to hedge interest rate risk, we may incur greater expense to enter into such transactions, which could adversely affect our results of operations.

Available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought, which could harm our operating results.

The interest rate hedging transactions that we enter into may not match the interest rate risk against which we are seeking protection. To the extent the hedging transaction and risk do not directly correspond, we may be exposed to interest rate risk for which we have no protection, which could harm our operating results.

The duration of the hedges we enter into may not match the duration of the related liability, which may expose our operating results to adverse changes in interest rates.

We enter into hedging transactions to try to mitigate interest rate risk to which we are exposed when we make loans. To the extent that a hedging transaction we enter into has a different duration than the liability for which we are seeking protection, we may be exposed to interest rate risk for which we have no protection, which could harm our operating results.

The income and asset tests applicable to REITs may limit the hedging transactions that we undertake.

Hedging assets do not qualify for purposes of the REIT asset tests. Income from hedging instruments do not qualify for purposes of the 75% income test and only qualify for purposes of the 95% income test in certain circumstances. Therefore, in order to maintain our qualification as a REIT we may choose to refrain from engaging in particular types of hedging transactions or may limit the level of our hedging activities even though such foregone hedging transactions might otherwise have been beneficial for us.

The party owing money in the hedging transaction may default on its obligation to pay.

Each hedging transaction that we enter into involves a counterparty that takes a position on the other side of the hedge. If the counterparty owes money in the hedging transaction and fails to pay, we could lose money on the transaction, which could harm our results of operations.

The credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction.

Our ability to sell or assign our side of any hedging transaction that we enter into depends in part on the credit quality of the counterparty owing money on the hedge. If the credit quality of the counterparty is inadequate, we could face difficulty in realizing on our side of the hedging transaction, which could impair our protection against interest rate risk and harm our results of operations.

Fluctuating or rising interest rates may affect our ability to originate loans, the value of our loans, the amount of borrowings that we are permitted to maintain under our warehouse credit line, our ability to securitize our loans and the value of our retained interests in mortgage pools.

Under a normal yield curve, an investment in fixed-rate mortgage loans will decline in value if long-term interest rates increase. Accordingly, in a period of rising interest rates, the value of our fixed-rate loans and the value of our retained interests in certain mortgage pools would decrease. This would adversely affect our financial condition. An increase in interest rates could also adversely affect our ability to securitize our existing loans on favorable terms, which is a primary source of our financing.

In addition, we borrow funds to finance our mortgage-related investments, which can worsen the effect of a decline in value resulting from an interest rate increase. For example, if we were to borrow $90 million to originate $100 million in mortgage loans at 5%, and if interest rates were to increase from 5% to 6%, the value of the mortgage loans may decline to a level below the amount maintained under the terms of our borrowing. Under these circumstances, the lenders under our warehouse line of credit could require us to prepay a portion of our borrowings to the extent that our outstanding borrowings plus accrued interest under the warehouse line of credit exceed the product of the present value of our mortgage loans and the 80% (currently 92%, but to be reduced to 80% upon the completion of this offering) advance rate. We would then be required to find funds from another source to prepay the borrowings.

Prior to the completion of a securitization, we fund the long-term fixed-rate loans that we originate in part with short-term borrowings under our warehouse credit line, which exposes us to risk of interest rate increases and increased interest expense.

We use our warehouse credit line, which is a short-term facility, to fund the loans we make to automotive dealers, which are long-term fixed-rate loans. Our operating results and cash flow depend on the difference between the interest rate at which we borrow funds and the interest rate at which we lend these funds. Until we are able to place our loans in a securitization, the pricing of our assets and our liabilities are not matched. Changes in market interest rates, or in the relationships between short-term and long-term market interest rates, or between different interest rate indices, could affect the interest rates charged on interest earning assets differently than the interest rates paid on interest bearing liabilities, which could result in an increase in interest expense relative to our interest income.

We expect to incur additional expenses in marketing our new loan products, which may reduce our operating results.

A key component of our growth strategy is the expansion of our loan product offerings to include variable-rate cash flow-based loans as well as both fixed-rate and variable-rate real estate mortgage loans. To date, the development of our name recognition in the automotive retail industry has been associated with our fixed-rate cash flow-based loan product. Following completion of this offering, we intend to focus our advertising on highlighting our expanded product offerings and we may incur substantial expenses in marketing these new products. To the extent that we do not achieve the revenue growth we expect from the expanded product offerings, the increased expenses we expect to incur would harm our operating results.

If we were terminated as servicer of the loans held in our securitizations, our income would be reduced and the performance of the loans could suffer.

Upon the occurrence of specified servicer defaults, we may be terminated as servicer of the loans included in our securitizations and a successor servicer may be appointed. If we were terminated as servicer, we would no longer receive our servicing fee. For the fiscal year ended September 30, 2003,

income from loan servicing was $0.4 million. We intend to complete future securitizations on-balance sheet and the performance of any loans held in those securitizations could be adversely affected if we were terminated as servicer. We cannot provide any assurances that any successor servicer would be able to service the loans according to our standards. Any transition to a successor servicer could result in reduced or delayed collections and information regarding the loans and a failure to meet all of the servicing procedures required by the applicable servicing agreement.

If automotive dealers that borrow from us suffer losses that are not covered by insurance or that are in excess of their insurance coverage limits, they may be unable to repay their loans, and we could lose our invested capital and anticipated profits.

Automotive dealers generally are required under the terms of our loans to maintain insurance coverage in respect of the real estate collateral, including hazard insurance. However, catastrophic losses, such as losses due to wars, earthquakes, floods, hurricanes, terrorism, pollution or environmental matters, generally are either uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. If one of these events occurred to, or caused the destruction of, the real estate collateral for one or more of our loans, we could lose our invested capital in the loan and anticipated profits.

We may be unable to recover our loan amount or collect balances due from any automotive dealer in bankruptcy.

If an automotive dealer that borrows from us enters into bankruptcy or liquidation, our ability to recover our investment in the loan may be delayed and/or limited. A bankruptcy petition with respect to any such dealer will stay the exercise of a power of sale and the commencement or continuation of a foreclosure action against the mortgaged property. Consequently, we may encounter significant delay in attempting to recover our investment. In addition, we may encounter increased risk with respect to our cash flow-based loan product for which the loan amount exceeds the value of the real estate collateral. A bankruptcy court that determines the value of the mortgaged property to be less than the outstanding principal balance of the related loan may, subject to certain protections available to lenders, stop us from foreclosing on such mortgaged property and, as a part of a restructuring plan, reduce the outstanding principal balance of the related loan to the value of the mortgaged property as it exists at the time of the proceeding. A court could also grant a dealer in bankruptcy a reasonable time to cure a payment default, reduce monthly payments due under a loan, change the rate of interest due on a loan or otherwise alter the payment terms of a loan. As a result of the foregoing, our recovery with respect to dealers that enter into bankruptcy may be significantly delayed, and the aggregate amount we ultimately collect may be substantially less than the amount owed.

Because our loans are non-recourse with respect to the personal assets of the dealer, we may be unable to recover our full loan amount or collect balances due.

Our loans are typically secured in part by the real estate assets and in part by the business assets other than the automobile inventory of an automotive dealer. However, our loans are non-recourse with respect to the personal assets of the individual or individuals who own the dealership. Consequently, if we sought to recover our loan amount, and the value of the real estate and business assets of the dealer was less than the amount owed under the loan, we would not be able to foreclose on the personal assets and non-dealer business assets of the individuals who own the dealership, except in the case of fraud and other limited circumstances.

Our liens on business asset collateral of automotive dealers generally are subordinated in whole or in part to liens held by floor plan financing lenders, which could cause us to suffer a loss.

In addition to obtaining real estate collateral, we place liens on the dealership's business assets, including automobile parts and equipment and intangible property but not the dealership's automobile inventory, at the time we originate the loan. For our loan portfolio as of September 30, 2003, the value of the business asset collateral represented 80.0% of the outstanding principal amount of the loans. Typically, our liens on the business assets of a dealer are subordinated in whole or in part to the lien of the lender providing floor plan financing to the dealer. In the event of a bankruptcy or liquidation of a dealer, there may not be adequate assets to satisfy any or all of the dealer's obligations to us.

Our liens on business asset collateral of automotive dealers may be adversely affected by our failure to uncover existing liens on a dealer's assets at the time we fund a loan, our failure to perfect our security interest in a dealer's assets, or the risk that some loan provisions may be held unenforceable, any of which could cause us to suffer a loss.

At the time we make a loan, we hire third parties to conduct searches to determine whether other creditors already have obtained liens on any of the dealer's assets. If these searches are not conducted properly or the search results are not analyzed correctly, we may not be aware of prior liens on the dealer's assets at the time we originate a loan.

In connection with legally perfecting our liens on dealers' assets, if we fail to file the proper paperwork with the correct governmental authorities or our submission contains errors, our liens may not be properly perfected. If this occurs, it is possible for another creditor to subsequently obtain a lien on the dealer's assets that is senior to our lien. In addition, the dealer's unsecured creditors could challenge our liens and if successful, reduce us to the level of an unsecured creditor.

Finally, some of our loans historically have included cross-collateralization provisions involving more than one dealer. These types of provisions could be challenged as a fraudulent conveyance by creditors of a dealer or by the representative of the bankruptcy estate of a dealer if a dealer were to become a debtor in a bankruptcy case, which could result in the avoidance of liens securing one or more of our loans.

In any of the above cases, in the event of a bankruptcy or liquidation of a dealer, there may not be adequate assets to satisfy any or all of the dealer's obligations to us, which could result in a partial or complete loss to us.

Our interest income may be adversely affected by unscheduled principal prepayments.

The rate and timing of unscheduled payments and collections of principal on our loans is impossible to accurately predict and will be affected by a variety of factors, including, without limitation, the level of prevailing interest rates, restrictions on voluntary prepayments contained in the loans, the availability of lender credit and other economic, demographic, geographic, tax and legal factors. In general, however, if prevailing interest rates fall significantly below the interest rate on a loan, the dealer is more likely to prepay that higher-rate loan than if prevailing rates remain at or above the interest rate on the loan. Unscheduled principal prepayments could adversely affect our results of operations to the extent we are unable to reinvest the funds we receive at an equivalent or higher interest rate, if at all.

Provisions in our loans regarding prepayment charges and yield maintenance charges may not be enforceable, which could adversely affect our results of operations.

The enforceability, under the laws of a number of states, of provisions similar to the terms of our cash flow-based loans providing for the payment of a prepayment charge or yield maintenance charge

upon an involuntary prepayment is uncertain. Accordingly, we cannot provide any assurance that, at any time when a prepayment charge or yield maintenance charge is required to be made in connection with an involuntary prepayment, the obligation to pay such prepayment charge or yield maintenance charge will be enforceable under applicable law or, if enforceable, the related liquidation proceeds will be sufficient to make such payment. Any challenge to the enforceability of such provisions that is upheld would result in our loss of such payments.

A decrease in interest rates could result in unscheduled prepayments under our loans, which could adversely affect our results of operations.

Our long-term, fixed-rate loans enable us to lock in an interest rate for a number of years. If prevailing interest rates fall below the interest rate on a loan that we have made, the dealer is more likely to prepay that higher-rate loan than if prevailing rates remain at or above the interest rate on the loan. Prepayment could adversely affect our results of operations if we are unable to reinvest the prepaid funds at an equivalent or higher interest rate, if at all.

Any failure of a guarantor to perform under a guarantee of one of our loans could cause us to suffer a loss.

We typically provide loans to special purpose entities established by an automotive dealer, which guarantees the loan. We cannot provide any assurance that upon a default any or all of the guarantors of the loan will perform under a guarantee. In the event of a default, the failure of guarantors to perform under a guarantee could cause us to suffer a loss.

Our ability to finance our business depends significantly on our ability to complete additional loan securitizations in the future.

We have completed four securitization transactions to date, all of which we accounted for as off-balance sheet transactions, through which we raised an aggregate of $538.2 million in gross proceeds and additional gross proceeds of $10.9 million from the subsequent sale of certificates associated with the securitizations to support our lending activities. In a typical securitization transaction, we transfer loans to a trust that aggregates our loans and, in turn, sells beneficial interests in the trust's assets to institutional investors. The securities issued by the trusts have been rated by nationally recognized statistical ratings organizations. These securitization transactions were critically important to us to raise additional capital to pay down the balances under our warehouse credit line and to create additional liquidity for use in originating new loans.

Although we historically have structured our four securitizations as off-balance sheet transactions, we intend to structure our securitizations as on-balance sheet secured financings following completion of this offering. We cannot provide any assurances that we will be able to complete additional loan securitizations in the future. As discussed below, there are a number of factors that may prevent us from completing additional loan securitizations. If we are unsuccessful in completing additional securitizations, our liquidity position and our ability to obtain the capital required for us to finance our business would be materially harmed.

If we are unable to extend the term of our warehouse credit line or secure a new credit line, we may not be able to continue to fund or expand our business.

We are substantially dependent on our $150 million warehouse credit line to originate new loans. As of September 30, 2003, the outstanding balance under this credit line was $97.3 million and the maturity date is October 1, 2004. Increasing the total loan amount available per dealership is an element of our business and growth strategy. However, under our current warehouse credit line, we are

not permitted to originate loans in an aggregate principal amount to any single customer equal to or in excess of $15 million. We currently are in discussions with potential lenders to enter into a replacement warehouse credit line following completion of this offering. However, we cannot provide any assurances that we will be able to replace our existing credit line on favorable terms, or at all. If our existing credit line expires and is not replaced, our liquidity position would be materially adversely affected, and we may not be able to originate new loans or continue to fund or expand our operations.

In addition, our cost of doing business will increase beginning on May 1, 2004 to the extent that we are unable to secure a replacement credit line. Borrowings under our current warehouse credit line are calculated using a 30-day commercial paper rate plus 300 basis points, which will be decreased to 200 basis points upon completion of this offering, but will increase to 250 basis points beginning on May 1, 2004 if our current warehouse credit line has not been prepaid in full and terminated by such time. If the warehouse credit line has not been prepaid and terminated prior to May 1, 2004, we will be required to pay a fee of $3 million. An additional fee of $1.5 million will be payable if the warehouse credit line has not been prepaid and terminated prior to October 1, 2004.

Disruptions in the capital markets generally and in the loan securitization market could hinder our ability to complete securitization transactions.

To the extent that the capital markets generally, and the loan securitization market in particular, suffer disruptions, we may be unable to complete additional securitization transactions, a primary source of our funding. Without additional securitizations, our liquidity position and our ability to obtain the capital required for us to finance our business would be materially harmed.

Disruptions in the credit quality and performance of our loan portfolio and the performance of loans included in our previous securitizations could reduce or eliminate investor demand for our loan securitizations in the future.

In order to make our securitizations attractive to investors, the credit quality and performance of the loans in our loan portfolio and those in our prior securitizations must maintain a high standard. Due to nonperformance of one of the loans in our 2003 securitization, as described above under the heading "We may not possess all of the material information relating to a dealer at the time we make a credit decision, which may cause us to incur losses on one or more of our loans" found on page 12, Moody's and Fitch Ratings recently downgraded the bonds issued in that securitization. If the credit quality and performance of our loans were to decline, investors might be less willing to invest in our securitizations, which could harm our ability to finance our business.

If our ability to service our loan portfolios is perceived as inadequate, we may be unable to complete additional securitizations to finance our business.

We act as a servicer of the loans in our current portfolio and in our four previous securitizations. If investors perceive that our ability to service our loans is inadequate, they would be less likely to invest in our future securitizations, which could harm our ability to finance our business.

Any material downgrading or withdrawal of ratings assigned to securities issued in our previous securitizations would reduce demand for additional securitizations by us.

A critical factor for investors in determining whether to invest in our securitizations are the ratings assigned to the securities issued by nationally recognized statistical ratings organizations such as Moody's and Fitch Ratings. A downgrade of any securities in our previous securitizations therefore could harm our ability to complete future securitizations. Due to nonperformance of one of the loans in our 2003 securitization, as described above under the heading "We may not possess all of the material information relating to a dealer at or following the time we make a credit decision, which may

cause us to incur losses on one or more of our loans" found on page 12, Moody's and Fitch Ratings recently downgraded the bonds issued in that securitization. These recent downgrades and any future downgrades could make it more difficult for us to finance our business using loan securitizations.

Events or changes in perception that adversely affect the automobile industry could hinder our ability to complete additional securitizations.

Because we focus solely on making loans to automotive dealers in the United States, our business is exposed to events or changes that negatively affect the automobile industry, which historically has experienced fluctuations in performance. At any time that investors perceive a decline in the automobile industry, they may seek to invest in businesses related to other industries and be less inclined to invest in our securitizations, which could harm our ability to finance our business.

After this offering, we expect to have approximately $41.7 million of debt, all of which will be variable-rate debt, which may impede our operating performance and growth.

Required repayments of debt and related interest can adversely affect our operating performance. As of September 30, 2003, our outstanding debt included approximately $97.3 million under our $150 million revolving warehouse line of credit and approximately $10.3 million of subordinated debt. The interest rate on amounts borrowed under our warehouse credit facility was 4.06% as of September 30, 2003. As part of this offering, we expect to repay approximately $76.3 million outstanding under the warehouse credit facility and to repay in full our outstanding subordinated debt. After this offering, we expect to have approximately $41.7 million of outstanding indebtedness, all of which will bear interest at a variable rate. Increases in interest rates on our existing indebtedness would increase our interest expense, which could harm our cash flow and our ability to pay distributions.

Our organizational documents contain provisions that may inhibit potential acquisition bids that you and other shareholders may consider favorable, and the market price of our common shares may be lower as a result.

Upon completion of this offering, our organizational documents will contain provisions that may have an anti-takeover effect and inhibit a change in our management. These provisions include the following:

Our rights and the rights of our shareholders to take action against our trustees and officers are limited.

Maryland law provides that a trustee or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests that an ordinarily prudent person in a like position would use under similar circumstances. Upon completion of this offering, our declaration of trust and bylaws will require us to indemnify our trustees and officers for actions taken by them in those capacities to the extent permitted by Maryland law. As a result, we and our shareholders may have more limited rights against our trustees and officers than might otherwise exist under common law. Accordingly, in the event that actions taken in good faith by any of our trustees or officers impede the performance of the company, your ability to recover damages from such trustee or officer will be limited.

You have limited control as a shareholder to prevent us from making any changes to our policies that you believe could harm our business, prospects, operating results or share price.

Our board of trustees has adopted policies with respect to certain activities, including the origination of loans, financing policies, hedging activities, equity capital policies and investment policies. These policies may be amended or revised from time to time at the discretion of our board of trustees without a vote of our shareholders. This means that our shareholders will have limited control over changes in our policies. Such changes in our policies intended to improve, expand or diversify our business may not have the anticipated effects and consequently may adversely affect our business and prospects, results of operations and share price.

There is no prior public market for our common shares, and our share price could be volatile and could decline following this offering, resulting in a substantial or complete loss on your investment.

Prior to this offering, there has not been a public market for any class of our common shares. An active trading market for our common shares may never develop or be sustained, which could affect your ability to sell your shares and could depress the market price of your shares. In addition, the initial public offering price will be determined through negotiations between us and the representatives of the underwriters and may bear no relationship to the price at which the common shares will trade upon completion of this offering.

The stock markets, including The Nasdaq National Market, on which our common shares will be quoted, have experienced significant price and volume fluctuations. As a result, the market price of our common shares is likely to be similarly volatile, and investors in our common shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of our common shares could be subject to wide fluctuations in response to a number of factors, including those listed in this "Risk Factors" section of this prospectus and others such as:

In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources.

A substantial number of our common shares will be eligible for sale in the near future, which could cause our common share price to decline significantly.

If our shareholders sell, or the market perceives that our shareholders intend to sell, substantial amounts of our common shares in the public market following this offering, the market price of our common shares could decline significantly. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. Upon completion of this offering, we will have outstanding 14,105,800 common shares of beneficial ownership. Of these shares, the 12,500,000 shares sold in this offering will be freely tradable, except for

any shares held by our "affiliates," as that term is defined by Rule 144 under the Securities Act, 73,130 additional common shares will be available for sale in the public market 90 days after the date of this prospectus and 1,214,370 additional common shares will be available for sale in the public market 180 days after the date of this prospectus following the expiration of lock-up agreements between our executive officers, trustees, SunAmerica Investments, Inc. and MLQ Investors, L.P., on the one hand, and the underwriters, on the other hand. Friedman, Billings, Ramsey & Co., Inc., as representative of the underwriters, may release these shareholders from their 180-day lock-up agreements at any time and without notice, which would allow for earlier sale of shares in the public market. As restrictions on resale end, the market price of our common shares could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them.

If you invest in this offering, you will experience immediate and substantial dilution.

We expect that the initial public offering price of our common shares will be substantially higher than the book value per share of the outstanding common shares. As a result, investors purchasing common shares in this offering will incur immediate and substantial dilution of $1.08 per share in the book value of the common shares. This means that the investors who purchase shares:

In addition, we have offered, and expect to continue to offer restricted shares to our employees and have reserved 407,358 common shares for future issuance under our equity incentive plan. To the extent restricted shares are granted, there may be further dilution to investors in this offering.

You may be limited in your ability to recover damages under Federal or State law if it is later determined that there are false statements contained in this prospectus relating to financial statements audited by Arthur Andersen LLP, our former auditors.

In 2002, we dismissed our independent public accountants, Arthur Andersen LLP, and retained KPMG LLP to act as our independent auditors. Arthur Andersen LLP had been our independent public accountants since 2000. Our financial statements as of September 30, 2000 and for the year then ended were audited by Arthur Andersen LLP. Arthur Andersen LLP has stopped conducting business before the SEC and has limited assets available to satisfy the claims of creditors. As a result, you may be limited in your ability to recover damages under Federal or State law if it is later determined that there are false statements contained in this prospectus relating to or contained in financial data derived from financial statements audited by Arthur Andersen LLP.

If we fail to qualify or remain qualified as a REIT, our distributions will not be deductible by us, and our income will be subject to taxation, reducing our earnings available for distribution.

We intend to qualify as a REIT under the Internal Revenue Code, which will afford us significant tax advantages. The requirements for this qualification, however, are highly technical and complex and even a technical or inadvertent mistake could jeopardize our REIT status. If we fail to meet these requirements, our distributions will not be deductible to us and we will have to pay a corporate level tax on our income. This would substantially reduce our earnings, our cash available to pay distributions and your yield on your investment in our shares. In addition, such a tax liability might cause us to borrow funds, liquidate some of our investments or take other steps which could negatively affect our operating results. Moreover, if our REIT status is terminated because of our failure to meet a technical

REIT requirement or if we voluntarily revoke our election, we would generally be disqualified from electing treatment as a REIT for the four taxable years following the year in which REIT status is lost.

We may be unable to comply with the strict income distribution requirements applicable to REITs or compliance with such requirements could adversely affect our financial condition.

To obtain the favorable treatment associated with qualifying as a REIT, we must distribute to our shareholders with respect to each year at least 90% of our net taxable income. In addition, we are subject to a tax on the undistributed portion of our income at regular corporate rates and also may be subject to a non-deductible 4% excise tax on this undistributed income. We could be required to seek to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT, even if conditions are not favorable for borrowing.

Recent change in taxation of corporate dividends may adversely affect the value of our shares.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 that was enacted into law on May 28, 2003, among other things, generally reduces to 15% the maximum marginal rate of tax payable by individuals on dividends received from a regular C corporation. This reduced tax rate, however, will not apply to dividends paid to individuals by a REIT on its stock except for certain limited amounts. While the earnings of a REIT that are distributed to its shareholders is still generally subject to less federal income taxation than earnings of a non-REIT C corporation which are distributed to its shareholders net of corporate-level income tax, this legislation could cause individual investors to view the stock of regular C corporations as more attractive relative to the stock of a REIT than was the case prior to the enactment of the legislation, because the dividends from regular C corporations would generally be taxed at a lower rate while dividends from REITs will generally be taxed at the same rate as the individual's other ordinary income. We cannot predict what effect, if any, the enactment of this legislation may have on the value of the stock of REITs in general or on our common shares in particular, either in terms of price or relative to other investments.

We may be subject to taxation on the sale of certain assets we hold at the time of the offering.

To the extent that we acquire assets from a C corporation in a carry-over basis transaction and we sell those assets within ten years of that acquisition, we will be subject to corporate income tax on the "built-in gain" in those assets. To the extent that we acquire the assets from a partnership in which a corporation owns an interest, we will be subject to this tax in proportion to the C corporation's interest in the partnership. Built-in gain is the amount by which an asset's fair market value exceeds its adjusted tax basis at the time we acquire the asset. Because (a) we will be considered for tax purposes to acquire the assets of Falcon Financial, LLC in a carry-over basis transaction at the time of the offering and (b) at least thirty percent (30%) of Falcon Financial, LLC is owned by a C corporation, if we sell any of the assets that we held immediately prior to the offering within 10 years of the offering, we will be subject to a corporate income tax on at least thirty percent of the built-in gain that existed with respect to our assets at the time of the offering, with that tax computed at the highest regular corporate rate. We cannot guarantee that we will not engage in a transaction that would require us to pay taxes on at least some of this built-in gain in the future. Further, we may forego opportunities to sell assets in order not to pay tax on this built-in gain, even though such sales might otherwise be beneficial to us.

Our ability to satisfy the income and asset tests applicable to REITs will be dependent on the nature of our assets, the sources of our income, and certain factual determinations, including the value of the real property underlying our loans.

As a REIT, 75% of our assets must consist of specified real estate related assets and certain other specified types of investments, and 75% of our gross income must be earned from specified real estate related sources and certain other specified types of income. If the value of the real estate securing each of our loans, determined at the time we become a REIT for our existing loans or the date of acquisition in the case of loans acquired after the offering is completed, is less than the highest outstanding balance of the loan for a particular taxable year, then a portion of that loan will not be a qualifying real estate asset and a portion of the interest income will not be qualifying real estate income. Accordingly, in order to determine the extent to which our loans constitute qualifying assets for purposes of the REIT asset tests and the extent to which the interest earned on our loan constitutes qualifying income for purposes of the REIT income tests, we will need to determine the value of the real estate at the time we acquire each loan. There can be no assurances that the IRS might not disagree with our determinations and assert that a lower value is applicable, which could negatively impact our ability to qualify as a REIT. These considerations also might restrict the types of loans that we can make in the future. For example, although Falcon Financial, LLC previously made loans that had a principal balance in excess of the value of the real estate securing the loan, we may be less likely to make loans of this type in the future in order to assist in the maintenance of our REIT status, even though such loans might otherwise have been the best investment alternative for us. In addition, the need to comply with those requirements may cause us to acquire other assets that qualify as real estate (for example, interests in other mortgage loan portfolios) that are not part of our overall business strategy and might not otherwise be the best investment alternative for us.

The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing the loans, that would be treated as sales for federal income tax purposes.

A REIT's net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, but including mortgage loans, held primarily for sale to customers in the ordinary course of business. We might be subject to this tax if we were to sell or securitize loans in a manner that was treated as a sale of the loans for federal income tax purposes. Therefore, in order to avoid the 100% prohibited transactions tax, we may choose not to engage in certain sales of loans and not to securitize loans in a manner that would be treated as a sale of the loans for tax purposes, even though such sales or securitization transactions might otherwise be beneficial for us.

Even if we qualify as a REIT, the income earned by a taxable REIT subsidiary will be subject to federal income tax.

We expect to own one or more taxable REIT subsidiaries. We expect that these entities will earn income that might otherwise jeopardize our status as a REIT. For example, we expect that a taxable REIT subsidiary will earn fees from origination and servicing of loans which would not be qualifying income for purposes of the REIT income tests. A taxable REIT subsidiary is taxed as a regular C corporation, and the income from the activities described above, and other income earned by our taxable REIT subsidiaries will therefore be subject to a corporate level tax, notwithstanding that we qualify as a REIT.

The REIT qualification rules impose limitations on the types of investments and activities that we may undertake which may preclude us from pursuing the most economically beneficial investment alternatives.

In order to qualify as a REIT, we must satisfy certain income and asset tests, which require that a certain specified percentage of our income and assets be comprised of certain types of income and assets. Satisfying these requirements might limit our ability to undertake investments and activities that would otherwise be beneficial to us. For example, hedging instruments are not qualifying assets for purposes of the REIT asset tests, and income from hedging instruments is not qualifying income for purposes of the 75% income test. Moreover, only income from hedging instruments that reduce the interest rate risk with respect to debt incurred by us to acquire or carry real estate assets is qualifying income for purposes of the 95% income test. Therefore, in order to maintain our qualification as a REIT, we may choose not to engage in certain hedging transactions of the type we have undertaken in the past, even though such transactions might otherwise be beneficial for us.

The exercise of a right of defeasance by a borrower under the loans might negatively impact our ability to satisfy the income and asset tests applicable to REITs.

In general, for purposes of the REIT income and asset tests our loans are qualifying assets and the interest from our loans are qualifying income only to the extent such loans are secured by real property. Our loans generally provide for a right of defeasance. If this right is exercised and specified requirements are met, the collateral of the borrower will be replaced with direct, non-callable and non-redeemable obligations of the United States for the payment of which its full faith and credit is pledged. Interest from loans secured by these securities will not be qualifying income for purposes of the 75% income test, and these loans may not be qualifying assets for purposes of the asset tests. While we plan to monitor the impact that the exercise of a right of defeasance might have on our ability to comply with these tests, and plan to take actions so that we may satisfy these tests, we cannot guarantee that such actions would be successful. Further, if a borrower does exercise a right of defeasance, we may take actions to maintain our status as a REIT even though such actions would not be otherwise beneficial for us.

The "taxable mortgage pool" rules will limit the manner in which we effect future securitizations.

There is a significant likelihood that our future securitizations, to the extent patterned after our existing securitizations, would be considered to result in the creation of taxable mortgage pools. As a REIT, so long as we own 100% of the equity interests in the taxable mortgage pool, we would not be adversely affected by the characterization of our securitizations as taxable mortgage pools (assuming that we do not have any shareholders who might cause a corporate income tax to be imposed upon us by reason of our owning a taxable mortgage pool). We would be precluded, however, from selling to outside investors equity interests in our securitizations, as we have done in the past, or from selling any debt securities issued in connection with the securitization that might be considered to be equity interests for tax purposes. These limitations will preclude us from engaging in the types of sales that we have used with respect to our prior securitizations to maximize our returns from securitization transactions.

We may be required to allocate "excess inclusion income" to our shareholders.

Our future securitization transactions likely will result in the creation of taxable mortgage pools, with the result that a portion of our income from that arrangement could be treated as "excess inclusion income." Excess inclusion income is an amount, with respect to any calendar quarter, equal to the excess, if any, of (a) income allocable to the holder of an equity interest in a taxable mortgage pool over (b) the sum of an amount for each day in the calendar quarter equal to the product of (i) the adjusted issue price of such interests at the beginning of the quarter multiplied by (ii) 120 percent of

the long-term Federal rate (determined on the basis of compounding at the close of each calendar quarter and properly adjusted for the length of such quarter). Excess inclusion income would be allocated among our shareholders. A shareholder's share of excess inclusion income (i) would not be allowed to be offset by any net operating losses otherwise available to the shareholder, (ii) would be subject to tax as unrelated business taxable income in the hands of most types of shareholders that are otherwise generally exempt from federal income tax, and (iii) would result in the application of U.S. federal income tax withholding at the maximum rate (30%), without reduction for any otherwise applicable income tax treaty, to the extent allocable to most types of foreign shareholders.

Some of the statements under "Summary," "Risk Factors," "Distribution Policy," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Our Company" and elsewhere in this prospectus constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will" and "would" or the negative of these terms or other comparable terminology.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider the factors referenced in this prospectus, including those set forth under the sections captioned "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Our Company" before you make an investment decision with respect to our common shares.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus.

This prospectus includes statistical data concerning the automotive retailing industry that we obtained from industry publications, including the U.S. Census Bureau's Annual Benchmark Report for Retail Trade and Food Services; January 2002 through March 2003, the 2003 National Automobile Dealers Association Data Report, Montgomery Securities April 1996 Industry Overview—Auto Dealerships and Ward's Dealer Business Mega Dealer 100. These publications generally indicate that they have obtained information from sources that they believe are reliable, but that they do not guarantee the accuracy and completeness of the information. In particular, we do not know the sample sizes that were used to determine the net profit margins of automotive dealers and the numbers presented may not be representative of all automotive dealers in the United States. We also have not sought the consent of any of these sources to refer to their data in this prospectus.

We estimate that the net proceeds that we receive in this offering will be approximately $114.7 million, based upon an assumed initial public offering price of $10.00 per share, which is the mid-point of the range set forth on the cover of this prospectus, and after deducting estimated underwriting discounts and estimated offering expenses payable by us. If the underwriters' over-allotment option is exercised in full, our net proceeds will be approximately $132.0 million after deducting estimated underwriting discounts and estimated offering expenses payable by us.

Pending the foregoing uses, we plan to invest the net proceeds in short-term, investment grade, interest-bearing securities that are consistent with our qualifying as a REIT.

We intend to elect to be treated as a REIT for federal income tax purposes in connection with the closing of this offering. Federal income tax law requires that a REIT distribute at least 90% of its REIT taxable income. For more information, please see "Material Federal Income Tax Considerations—Our Taxation as a REIT" beginning on page 105.

To satisfy the requirements to qualify as a REIT and to avoid paying income or excise tax on our income as a REIT, we intend to make regular quarterly distributions of all or substantially all of our REIT taxable income to holders of our common shares. Any future distributions we make will be at the discretion of our board of trustees and will depend upon, among other things, our actual results of operations. Our actual results of operations and our ability to pay distributions will be affected by a number of factors, including:

For more information regarding risk factors that could materially adversely affect our actual results of operations and our ability to pay distributions, please see "Risk Factors" beginning on page 9.

Prior to this offering and since our inception in 1997, we have not paid any distributions to holders of units in Falcon Financial, LLC.

The following table presents capitalization and other data as of September 30, 2003:

This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 38 and our financial information and related notes included elsewhere in this prospectus.

Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of our common shares in this offering and the net tangible book value per common share immediately after this offering. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our outstanding common shares. After giving effect to:

our pro forma net tangible book value as of September 30, 2003 would have been approximately $125.6 million, or $8.90 per common share. This amount represents an immediate increase in net tangible book value of $2.11 per share to existing shareholders prior to this offering and an immediate dilution in pro forma net tangible book value of $1.10 per common share to new investors. The following table illustrates this dilution.

Assumed initial public offering price					$	10.00

	Net tangible book value per share as of September 30, 2003	$	6.79	(1)

	Increase in net tangible book value per share to existing shareholders attributable to new investors		2.11

Pro forma net tangible book value per share after this offering						8.90

Dilution per share to new investors					$	1.10

Differences Between New and Existing Shareholders in Number of Shares and Amount Paid

The table below summarizes, as of September 30, 2003 on the pro forma basis discussed above, the differences between the number of common shares purchased from us, the total consideration paid and the average price per share paid by existing shareholders and by the new investors purchasing shares in this offering. We used an assumed initial public offering price of $10.00 per share, the mid-point of the range set forth on the cover of this prospectus, and we have not deducted estimated underwriting discounts and commissions and estimated offering expenses in our calculations.

If the underwriters exercise their over-allotment option in full, the percentage of shares held by existing shareholders will decrease to 10.1% of the total shares outstanding, and the number of shares held by new investors will increase to 14,375,000, or 89.9% of the total shares outstanding.

We were formed as a real estate investment trust in Maryland in August 2003 and will become the successor to Falcon Financial, LLC, which was organized in Delaware in 1997. Immediately before the closing of this offering, Falcon Financial, LLC will merge with and into our company, with our company as the surviving entity and the owners of Falcon Financial, LLC receiving common shares of our company. The following illustrates our structure immediately after the closing of this offering:

As the surviving entity, Falcon Financial Investment Trust will succeed to all of the assets and liabilities of Falcon Financial, LLC. Following completion of this offering, we intend to elect to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code. Our qualification as a REIT depends upon our ability to meet on a continuing basis, through actual annual (or in some cases, quarterly) operating results, various complex requirements under the Internal Revenue Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our shares. We believe that we will be organized in conformity with the requirements for qualification as a REIT under the Internal Revenue Code, and that our intended manner of operation will enable our company to meet the requirements for taxation as a REIT for federal income tax purposes. As a result of our election to be taxed as a REIT, we currently intend to change our fiscal year end to December 31 from September 30.

As a REIT, we generally will not be subject to federal income tax on REIT taxable income we distribute currently to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income and property.

In addition to the subsidiaries currently held by Falcon Financial, LLC which will become subsidiaries of ours at the time of the merger, we intend to form a taxable corporation, which we will wholly own, that will make an election to be treated as a taxable REIT subsidiary of ours. We expect that this entity will earn income and engage in activities that might otherwise jeopardize our status as a REIT. For example, our taxable REIT subsidiary could earn fees from the servicing and origination of loans, neither of which will be qualifying income for purposes of the REIT income tests, without jeopardizing our status as a REIT. A taxable REIT subsidiary is taxed as a regular corporation and its income will therefore be subject to federal, state and local corporate level tax.

You should read the following selected historical financial and operating data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes included elsewhere in this prospectus. The financial statements as of September 30, 2003 and 2002 and for each of the years in the three year period ended September 30, 2003 and as of September 30, 1999 and for the year then ended have been audited by KPMG LLP. The financial statements as of September 30, 2000 and for the year then ended have been audited by Arthur Andersen LLP. In 2002, we dismissed our independent public accountants, Arthur Andersen LLP, and retained KPMG LLP to act as our independent auditors. We had previously retained KPMG LLP as our auditors since our inception in 1997 through to 1999, when we dismissed KPMG LLP and subsequently engaged Arthur Andersen LLP. The financial statements of our predecessor, Falcon Financial, LLC, have been prepared in accordance with generally accepted accounting principles in the United States. We derived the historical financial data for our predecessor, Falcon Financial LLC, for each of the five fiscal years in the period ended September 30, 2003 from our predecessor's audited financial statements. Our predecessor's historical results are not necessarily indicative of our results for any future period.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the information included under the caption "Selected Financial and Other Data" and our financial statements and related notes appearing elsewhere in this prospectus.

We are a fully integrated, self-advised specialty finance company focused solely on the business of originating and servicing loans to automotive dealers in the United States. We have also provided loans to select motorcycle dealers on a limited basis. Upon completion of this offering, we intend to elect to be taxed as a REIT for federal income tax purposes and will become the successor to Falcon Financial, LLC, which was organized in Delaware in May 1997.

We closed our first loan in February 1998 and we have originated a total of 107 loans representing approximately $640 million in aggregate initial principal amount through September 30, 2003. For the fiscal year ended September 30, 2003, we originated 17 loans totaling $147.1 million in aggregate initial principal amount and, as of September 30, 2003, our portfolio consisted of 14 loans with an aggregate outstanding principal balance of $105.9 million, and we had $28.2 million in outstanding loan commitments. As of the date of this prospectus, we have funded $22.8 million of the loan commitments outstanding as of September 30, 2003. Our portfolio of 14 loans as of September 30, 2003 had an average principal amount of $7.6 million, a weighted-average remaining term of 175.7 months and a weighted-average interest rate of 8.96%. To date, our loans have been long-term, fixed-rate, cash flow-based and generally under $15 million in loan size. We have successfully securitized four pools of our loans in 1999, 2000, 2001 and 2003 totaling 92 loans representing $517.0 million in aggregate principal amount at the date of securitization, and we continue to provide primary servicing for all of our securitized loans.

We derive our revenues primarily from loan payments of interest and principal made by automotive dealers under loans we originate and from acting as primary servicer for our securitized loans. Historically, we also have derived revenues from gain on the sale of loans that we held and pooled for securitization because those transactions were structured as off-balance sheet transactions, as described below under the heading "—Off-Balance Sheet Arrangements." Following completion of this offering, however, we currently intend to structure our securitizations as on-balance sheet secured financings, and therefore do not expect to record any gain on sale in connection with future securitizations. We expect that we will incur losses initially until our volume of loan originations increases sufficiently to offset the increased general and administrative expenses we expect to incur following completion of this offering.

We enter into hedging transactions to mitigate the effect of changes in interest rates and credit spreads on the fair value of our fixed-rate loans held for sale. Changes in the fair value of our hedge positions are reflected in our statement of operations as they occur. Increases in the fair value of our loans held for sale that result from changing market conditions prior to securitization of those loans are not recognized until securitization takes place. Consequently, recognition of changes in fair value of our hedge positions and recognition of changes in the fair value of our loans held for sale do not necessarily occur in the same reporting period. In the future, we expect to continue our hedging efforts to offset potential declines in the value of our fixed-rate loans due to fluctuating interest rates.

Changes in interest rates also can affect our ability to originate loans and our ability to securitize loans and the value of our retained interests in securitization pools. Prevailing interest rates are at near historical lows and if we were to experience a period of rising interest rates in the future, it could result in a decline in the value of our retained interests in securitization pools. We have not historically and currently do not intend to enter into hedging transactions to mitigate our exposure to interest rate risk

relating to the value of our retained interests. An increase in interest rates also could affect our ability to securitize our existing loans on favorable terms or at all.

Our business depends on our access to external sources of financing at a cost we can absorb while still generating an attractive risk-adjusted return on the loans we fund using the proceeds of our financings. Prior to this offering, we have funded our operations primarily through a $150 million warehouse line of credit, pooling and selling loans we originate in securitization transactions, a $19.3 million senior subordinated loan and a $0.5 million junior subordinated loan. We plan to use approximately $76.3 million of the proceeds of this offering to repay a portion of the outstanding balance under our warehouse credit line, which was $97.3 million as of September 30, 2003, and to repay in full our senior subordinated loan and our junior subordinated loan. We are currently in discussion with prospective lenders to enter into a new warehouse credit line as soon as practicable after the closing of this offering. Upon entering into the new warehouse credit line, we intend to repay in full the remaining balance under our current warehouse credit line.

Since our inception, only two loans originated by us have become delinquent, one of which related to a loan in our 2001 securitization that defaulted in March 2002 and resulted in a loss of principal of $2.8 million. The second loan delinquency relates to a loan in our 2003 securitization with an unpaid principal balance of $9.5 million that defaulted in September 2003. Although the second loan delinquency is not yet resolved, we have estimated the loss upon the resolution of this loan may range from $3.0 million to $3.5 million. Correspondingly, we have taken a charge of $0.4 million, which reflects our assessment of the reduction in value of our retained interest relating to estimated resolution of this loan. We cannot provide any assurance that the loss will fall within the range indicated. When we sell our loans into a securitization, we will make certain assumptions about loan losses in calculating the estimated fair value of our retained interests in the securitizations, which is described below under "—Critical Accounting Policies and Management Estimates—Retained Interests in Loan Securitizations." Subsequent to the closing of this offering, we will account for our securitizations as on-balance sheet financings. Accordingly, we will establish a reserve for possible loan losses for estimated losses inherent in our loan portfolio.

Following completion of this offering, we plan to focus on internal growth of our business by expanding our loan product offerings to include our new variable-rate cash flow-based and fixed-rate and variable-rate real estate mortgage loan products. We expect to incur additional costs to introduce these new products as we must hire additional employees and increase our marketing, advertising and underwriting efforts. We also expect to face increased competition from established providers in connection with our offering of real estate mortgage loan products, which could affect the profitability of these products.

As described in "Management—Equity and Benefit Plans" beginning on page 87, we intend to adopt a new equity incentive plan immediately before the closing of this offering. All outstanding options under the option plan of our predecessor, Falcon Financial, LLC, will be terminated and we will grant restricted common shares to certain employees pursuant to our new equity incentive plan. We also intend to make special grants of restricted shares to the members of our senior management and other key employees, which may provide incentives to these individuals through ownership of our common shares. As a result, we expect to incur compensation expense of approximately $1.1 million in each of our next three fiscal years and may be subject to variable plan accounting treatment with respect to those grants.

Following this offering, we currently intend to pay regular quarterly distributions of all or substantially all of our REIT taxable income to holders of our common shares. Any future distributions we make will be at the discretion of our board of trustees and will depend upon, among other things, our actual results of operations. Our actual results of operations and our ability to pay distributions will be affected by a number of factors, including the revenue we receive from our loans, our ability to

complete additional loan securitizations, our operating expenses, the ability of our customers to meet their loan payment obligations and unanticipated expenditures.

The discussion of financial condition and results of operations in this prospectus relates to our predecessor, Falcon Financial, LLC, a Delaware limited liability company formed in 1997. Immediately prior to the closing of this offering, we will merge our predecessor with and into Falcon Financial Investment Trust, a newly formed Maryland real estate investment trust and the registrant of this offering. In connection with our election to be taxed as a REIT following the completion of this offering, we anticipate we will have a fiscal year ending on December 31, as opposed to a fiscal year ending on September 30, which was used by our predecessor.

Historically, we have funded our business in substantial part with the proceeds from four securitization transactions in 1999, 2000, 2001 and 2003 totaling $517.0 million in aggregate principal amount at the date of securitization. For a detailed description of our securitizations, see "Our Company—Our Loan Portfolio—Previous Securitizations" beginning on page 67. After originating a sufficient number of loans to develop a pool available for securitization, our approach has been to subsequently sell the loans we originate in a securitization transaction. These securitization transactions have been critically important to us as a primary source of funds to originate loans.

We have structured each of our four securitizations as off-balance sheet transactions, and therefore we have recorded gain on sale with respect to the loans included in each securitization. Following completion of this offering, we currently intend to structure our future securitizations as on-balance sheet secured financings. As a result of this anticipated change in structuring future securitizations, comparisons of our future results of operations to our historical operating results included in this prospectus will not be meaningful. In particular, we do not expect to record any gain on sale in connection with future securitizations and instead will continue to recognize interest income associated with each loan we originate and interest expense associated with secured borrowings even after we place the loan into securitization. In conjunction with the secured financing transaction, we will record secured borrowings as well as the associated securitization expenses, which will be amortized over the term of the financing. Since the future transactions will not be sale transactions, the associated loan receivables will remain on our financial statements instead of being removed as was the case historically with a sale securitization transaction. The effect on the future financial statements will be that the loan receivable portfolio along with our borrowings will continue to increase with each new loan we issue. The increase in loan assets and related liabilities will also create a corresponding increase in interest income on loans along with an increase in interest expense from the related financings. Since we will no longer be selling the loan assets, there will be no gain on sale of loans recorded in the statement of operations, nor will there be a related retained interest as a result of future securitizations recorded on the balance sheet. The total portfolio of loans, their applicable financing arrangements, their interest income and related interest expense and a provision for and allowance for potential loan losses will be reflected on our financial statements. The on-balance sheet approach will also show the earnings over the entire term of the loan on a more consistent basis as compared to showing earnings for a short period and then reflecting a gain on sale transaction, as was the case historically. The impact of securitizing loans using on-balance sheet treatment is that the economic benefit of our loans will be realized over their life, rather than recognizing their present value early in their economic life in the form of gain on sale.

Our ability to complete additional securitizations in the future may be affected by several factors, including the following:

For more information regarding the performance of one of our loans and the recent downgrading of our 2003 securitization, see "Our Company—Our Loan Portfolio—Previous Securitizations" beginning on page 67 and "Risk Factors—We may not possess all of the material information relating to a dealer at or following the time we make a credit decision, which may cause us to incur losses on one or more of our loans" beginning on page 12.

For each previous and future securitization transaction, the loan trust certificates represent beneficial interests in one or more trust funds established by our special purpose bankruptcy remote subsidiary. The trust fund assets consist primarily of bonds issued by a trust established by the special purpose subsidiary. The bonds are generally secured by loans secured by interests in real estate used in the operation of automotive dealerships and also secured by a lien on the business assets, including automobile parts and equipment and intangible property but not the dealership's automobile inventory.

We also are subject to off-balance sheet risk in the normal course of our business from commitments we make to extend credit to automotive dealers. As of September 30, 2003 and September 30, 2002, we had commitments to extend credit to our customers of $28.2 million and $28 million, respectively, and amounts available under our warehouse credit line of $52.7 million and $52.7 million, respectively, to fund such commitments. For a detailed description of the underwriting procedures we undertake before making a commitment to extend credit, see "Our Company—Our Lending Process" beginning on page 70.

We consider the policies discussed below to be critical to an understanding of our financial statements. The application of these accounting policies require our management to make certain judgments and estimates that directly affect our financial reporting results. Specific risks for these critical accounting policies are described in the following paragraphs. In regards to these policies, we caution you that future events rarely develop exactly as forecasted, and the best estimates of our management routinely require adjustment.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Management believes that the estimates and assumptions utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from those estimates.

Currently, all loans originated by us are underwritten with the intention of securitizing and selling the portfolio and are carried at the lower of cost or market value on the statement of financial position. The amount (if any) by which the cost exceeds the fair value is recorded in a valuation allowance. Changes in the valuation allowance are recorded in the statement of operations. As of September 30, 2003, no valuation allowance was deemed necessary.

In the future, we anticipate that we will originate loans that will be underwritten with the intention of securitizing the receivables in a financing transaction and carrying the loans on the statement of financial position to maturity. The loans receivable will be stated at their principal amount outstanding, less net deferred loan fees, unearned discounts and allowance for loan losses. Nonrefundable

origination fees less certain related direct costs associated with the origination of the loans will be deferred and amortized into interest income over the term of the loan using a method that approximates the interest method.

In the future, we anticipate that we will carry originated loans on our statement of financial position for the entire term of the loan. In this regard, an allowance for loan losses will be established which will be based on a periodic analysis of the loan portfolio and in our management's judgment, reflects an amount that is adequate to absorb losses inherent in the existing portfolio. In evaluating the portfolio, our management considers a variety of factors such as the size of the portfolio, prior loss experience, current and potential risks of the loan portfolio, present financial condition of the borrower, current economic conditions and other portfolio risk characteristics. Provisions for loan losses are charged to operations. Loans, including impaired loans, are charged-off against the allowance for loan losses when actual losses have been established.

A loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all the amounts due according to the contractual terms of the loan agreement. A loss from impairment represents the amount by which a creditor's recorded investment in a loan exceeds the present value of the expected future cash flows from the loan discounted at the loan's effective interest rate (including the fair value of collateral that may be part of the loan). Losses for which such provisions for impairment are made, unless applied as a write-down of the recorded investment in the loan, represent a portion of the creditor's allowance for loan losses.

Historically, we have sold through securitization transactions substantially all of the loans we originate. We account for our loan securitizations in accordance with Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities—a replacement of FASB Statement 125. When we sell loans in a securitization, we may retain one or more subordinated certificates from the certificates issued. Securitizations may be structured in various ways but generally conform to a common model. Typically, an issuer sells a portfolio of loans to a special-purpose entity established for the sole purpose of purchasing and reselling the loans to a securitization trust. The securitization trust then may issue bonds or certificates collateralized by the loans transferred to the securitization trust. The proceeds received from these bonds or certificates are used to purchase the loans from the issuing entity. The gain on the sale of loans is the difference between the proceeds from the sale of loans, net of related sale costs, and the allocated carrying amount of the receivables sold, including deferred origination fees and costs. We determine the carrying amount by allocating the total carrying amount of the loans sold between the portion sold and the interests retained based on each portion's relative fair values at the time of the securitization. Assumptions used in calculating the estimated fair value of such retained interests are subject to volatility that could materially affect operating results.

Retained interests in securitizations are accounted for as available for sale securities and are carried at estimated fair value, with unrealized gains or losses included in members' equity (accumulated other comprehensive income or loss). We are not aware of an active market for the purchase and sale of these retained interests at this time; accordingly, we estimate the fair value of the retained interest by calculating the present value of the estimated expected future cash flows received by us after being released by the securitization trust, using a discount rate commensurate with the risk involved. The cash flows being discounted are adjusted for estimated net losses due to defaults or prepayments of the underlying loans. To date, our loan securitization pools have experienced two loan delinquencies, one of which defaulted in March 2002 and resulted in a loss of $2.8 million, and no prepayments. The second loan delinquency relates to a loan in our 2003 securitization with an unpaid principal balance of $9.5 million that defaulted in September 2003. Although the second loan

delinquency is not yet resolved, we have estimated the loss upon the resolution of this loan may range from $3.0 million to $3.5 million. Correspondingly, we have taken a charge of $0.4 million, which reflects our assessment of the reduction in value of our retained interest relating to estimated resolution of this loan. We cannot provide any assurance that the loss will fall within the range indicated. All other loans included in our securitization pools are current.

Each loan securitization has a specific credit enhancement in the form of cash flow requirements that must be met before we receive any cash on our retained interest.

Changes in the fair value of the retained interests resulting from changes in the timing of cash flows to be received by us or changes in market interest rates are adjusted through other comprehensive income in members' equity. Reductions in the estimated aggregate cash flows to be received by us, caused by defaults or prepayments or the timing of expected future cash flows that result in a reduction to the fair value of the retained interests, are considered an other than temporary impairment and are recognized through a charge to expense in that period.

Interest is accrued monthly on outstanding principal balances unless our management considers the collection of interest to be uncertain. We generally consider interest to be uncertain when loans are contractually past due three months or more.

We defer origination fees received or costs incurred related to the origination of the loans as an adjustment to the carrying value of the loans held for sale. We amortize origination fees and costs incurred into income over the life of the related loan. At the time of sale of the related loans, we recognize as income any remaining deferred fees and costs income and such amounts are included with the gain or loss on the sale of such loans.

Under servicing agreements for all of our securitizations, servicing fees for loans in good standing are accrued monthly based upon outstanding principal balances on loans serviced. We act as primary servicer and special servicer with respect to loans securitized. A subsidiary of The Bank of New York acts as Master Servicer. We earn a servicing fee of 0.085% (0.095% on our most recently completed securitization in 2003) per annum of the outstanding loan balance with respect to each loan serviced in our capacity as primary servicer. We will earn a servicing fee of 0.25% per annum of the outstanding balance of each loan in default, if any. Servicing fees on defaulted loans are earned and paid monthly once a loan enters default status. We have received special servicing income with respect to only one loan. Fees received for loan servicing approximate the actual cost of servicing.

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS No. 133. In June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS No. 133. These Statements, collectively referred to as SFAS No. 133, establish accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at its fair value. Changes in the fair value of the derivative are to be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows gains and losses on derivatives to offset related results on the hedged items in the statement of operations and requires that a company must document, designate, and assess the effectiveness of transactions that receive hedge accounting under SFAS No. 133.

We enter into certain transactions, including short sales and purchases, securities resale and repurchase agreements, and interest rate swaps, to mitigate the effect that changes in interest rates and credit spreads have on the fair value of our fixed rate loan portfolio held for sale. Periods of rising interest rates and widening credit spreads decrease the fair value of the loan portfolio held for sale. Generally, we enter into these transactions when the rate is set on a pending loan just prior to the closing of the loan. The new loan is added to the pool of loans being held for sale and the pool is then reviewed to determine what, if any, additional hedging transaction is to be executed. We typically short U.S. Treasuries and invest the proceeds in repurchase agreements with Goldman, Sachs & Co. with U.S. Treasury notes as the underlying securities. In swap transactions, we will generally enter into an interest rate swap contract, receiving a floating rate of interest and paying a fixed rate of interest. The term of the swap contracts is determined by duration of the loans held for sale pool. We have a contractual obligation to settle the repurchase and swap agreements with Goldman, Sachs & Co. at the current fair value on the repurchase date.

We carry each of the derivative instruments on our statement of financial condition at fair value or amounts that approximate fair value. The determination of fair value is fundamental to our statement of financial condition and operations. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Quoted market prices in active markets are the best evidence of fair value and we use them when available. We typically obtain them through electronic quotations or published prices. If quoted market prices in active markets are not available, our estimate of fair value is based on, if available, quoted prices or recent transactions in less active markets and/or prices of similar instruments. We typically obtain this type of information through broker quotes or third-party pricing sources.

While we consider these to be effective as hedges from an economic perspective for managing the risks associated with our loans held for sale portfolio, they do not qualify for hedge accounting treatment under SFAS No. 133.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The statement specifies the accounting for certain employee termination benefits, contract termination costs and costs to consolidate facilities or relocate employees and is effective for exit and disposal activities initiated after December 31, 2002. We do not expect the statement to have a material adverse effect on our financial condition or results of operations.

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 specifies the disclosures to be made about obligations under certain issued guarantees and requires a liability to be recognized for the fair value of a guarantee obligation. The recognition and measurement provisions of the interpretation apply prospectively to guarantees issued after September 30, 2002. We do not expect the recognition and measurement provisions to have a material adverse effect on our financial condition or results of operations.

In January 2003, the FASB issued FIN No. 46 "Consolidation of Variable Interest Entities." FIN No. 46 requires a company to consolidate a variable interest entity (VIE) if the company has variable interests that give it a majority of the expected losses or a majority of the expected residual returns of the entity. Prior to FIN No. 46, VIEs were commonly referred to as SPEs. FIN No. 46, as amended by FIN No. 46-6 "Effective Date of FASB Interpretation 46" which was released by FASB in October 2003, is effective for public companies in the first interim or annual period ending after December 15, 2003 if certain conditions are met. We must apply the standards of FIN No. 46 for our fiscal year ended September 30, 2004 financial statements. We do not currently expect that adoption of this new accounting standard will have a material effect on our financial condition or results of operations.

In April 2003, the FASB issued SFAS Statement No. 149, Amendment to Statement No. 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS Statement No. 133. The changes in SFAS Statement No. 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. SFAS Statement No. 149 is effective for contracts entered into or modified after June 30, 2003, except in certain instances detailed in the statement, and hedging relationships designated after June 30, 2003. Except as otherwise stated in SFAS Statement No. 149, all provisions should be applied prospectively. We do not expect the statement to have a material adverse effect on our financial condition or results of operations provided that we account for all of our loans on-balance sheet.

Total revenue for the year ended September 30, 2003, or Fiscal 2003, increased approximately $10.5 million, or 78.5%, to approximately $23.9 million from $13.4 million for the year ended September 30, 2002, or Fiscal 2002. The increase was primarily due to increases in gain on sale of loans, gain on sale of retained interests, gain on interest rate swap contracts and gain on securities sold, but not yet purchased. These increases were partially offset by decreases in interest income on loans held for sale and interest income on interest rate swap contracts.

Interest income on loans held for sale for Fiscal 2003 decreased by approximately $0.4 million, or 5.2%, to approximately $8.1 million from approximately $8.5 million in Fiscal 2002. The decrease was due to a decrease in the weighted average interest rate on the loans, approximately 9.1% in Fiscal 2003, as compared to approximately 9.5% in Fiscal 2002.

Interest income on securities purchased under resale agreements for Fiscal 2003 increased by approximately $0.1 million, or 49.5%, to approximately $0.2 million from approximately $0.1 million in Fiscal 2002. The increase was due to an increase in the weighted average asset balance to approximately $29.8 million in Fiscal 2003 from approximately $9.0 million in Fiscal 2002. The increase in the weighted average asset balance was offset by a decline in the weighted average interest rate to 0.62% in Fiscal 2003 from approximately 1.4% in Fiscal 2002.

Interest income on interest rate swap contracts for Fiscal 2003 decreased by approximately $1.1 million, or 72.4%, to approximately $0.4 million from $1.5 million in Fiscal 2002. The decrease was primarily due to a reduction in the weighted average level of outstanding swap contracts, to approximately $22.4 million during Fiscal 2003 from approximately $59.1 million during Fiscal 2002. The weighted average interest rate also declined to approximately 1.8% in Fiscal 2003 from approximately 2.5% in Fiscal 2002.

Interest income from retained interests for Fiscal 2003 decreased by approximately $0.1 million, or 6.7%, to approximately $1.4 million from approximately $1.5 million in Fiscal 2002. The decrease was primarily due to a decrease in the weighted average retained interest asset, approximately $7.1 million during Fiscal 2003, as compared to approximately $7.5 million during Fiscal 2002.

During Fiscal 2003, we realized a gain of approximately $10.7 million upon securitization of loans held for sale compared with a gain on sale of approximately $5.0 million during Fiscal 2002. We recognized a larger gain on sale for the securitization during Fiscal 2003 due primarily to a larger spread between the weighted average yield on the loans securitized compared to the overall cost of the funds associated with the securitization. Our overall cost of funds for the 2003 securitization was lower as a result of a large decrease in prevailing interest rates during Fiscal 2003.

Total gain on sale of retained interests for Fiscal 2003 increased by approximately $0.8 million or 523.5%, to approximately $0.9 million from approximately $0.1 million in Fiscal 2002. The increase was

due to lower interest rates during Fiscal 2003 as well as an increase in the amount of retained interests sold.

Gain on interest rate swap contracts for Fiscal 2003 increased by approximately $3.5 million, to approximately $0.3 million from a loss of approximately $3.2 million in Fiscal 2002. The increase was primarily due to the market fluctuations and the composition of our hedging instruments.

Gain on securities sold, but not yet purchased for Fiscal 2003 increased by approximately $2.0 million, to approximately $1.1 million from a loss of approximately $0.9 million in Fiscal 2002. The increase was primarily due to the market fluctuations and the composition of our hedging instruments.

Income from loan servicing for Fiscal 2003 increased by approximately $0.1 million, or 34.1%, to approximately $0.4 million from approximately $0.3 million in Fiscal 2002. The increase was primarily due to the loan servicing income from an additional securitization which we completed during Fiscal 2003.

Other income for Fiscal 2003 increased by approximately $0.2 million, or 35.3%, to approximately $0.6 million from approximately $0.4 million in Fiscal 2002. The increase was primarily due to an increase in fees earned on potential loan fundings which did not close.

Total expenses for Fiscal 2003 decreased by approximately $0.4 million, or 2.9%, to approximately $14.3 million from approximately $14.7 million in Fiscal 2002. The decrease was primarily due to decreases in total interest expense on borrowings and interest expense on interest rate swap contracts. These decreases were partially offset by increases in interest expense on securities sold, but not yet purchased, other than temporary decline in value of retained interests and salaries and benefits.

Total interest expense on borrowings for Fiscal 2003 decreased by approximately $0.6 million, or 11.8%, to approximately $4.8 million from approximately $5.4 million in Fiscal 2002. The decrease was primarily due to a decrease in the weighted average interest rate during Fiscal 2003, offset by an increase in the weighted average debt balance. The weighted average interest rate for our borrowings during Fiscal 2003 was approximately 4.5% as compared to approximately 5.5% during Fiscal 2002. The weighted average debt balance was approximately $106.4 million during Fiscal 2003 as compared to approximately $98.4 million during Fiscal 2002.

Interest expense on securities sold, but not yet purchased for Fiscal 2003 increased by approximately $0.8 million, or 148.8%, to approximately $1.3 million from approximately $0.5 million during Fiscal 2002. The increase was primarily due to an increase in the weighted average balance of outstanding contracts during Fiscal 2003, offset by a decrease in the weighted average interest rate on the outstanding contracts during Fiscal 2003. The weighted average balance of outstanding contracts was approximately $29.8 million during Fiscal 2003 as compared to approximately $9.0 million during Fiscal 2002. The weighted average interest rate during Fiscal 2003 was approximately 4.2% as compared to approximately 5.6% during Fiscal 2002.

Interest expense on interest rate swap contracts for Fiscal 2003 decreased by approximately $2.0 million, or 63.3%, to approximately $1.2 million from approximately $3.2 million in Fiscal 2002. The decrease was primarily due to a reduction in the weighted average level of outstanding swap contracts, as well as a reduction in the weighted average interest rate on the swap contracts. The weighted average balance of outstanding contracts was approximately $22.4 million during Fiscal 2003 as compared to approximately $59.1 million during Fiscal 2002. The weighted average interest rate during Fiscal 2003 was approximately 5.3% as compared to approximately 5.5% during Fiscal 2002.

Facility fee expense for Fiscal 2003 remained relatively unchanged from Fiscal 2002 at approximately $0.4 million.

Other than temporary decline in value of retained interests for Fiscal 2003 increased by approximately $0.2 million, or 137.0%, to approximately $0.4 million from approximately $0.2 million in Fiscal 2002. This increase was due to the effect of a loan default in the 2003 securitization.

Salaries and benefits expense for Fiscal 2003 increased by approximately $0.9 million, or 31.5%, to approximately $3.8 million from approximately $2.9 million in Fiscal 2002. The increase was primarily due to increases in bonuses paid or accrued during Fiscal 2003 as compared to Fiscal 2002.

Professional fees for Fiscal 2003 increased by approximately $251,000, or 71.4%, to approximately $601,000 from approximately $350,000 in Fiscal 2002. The increase was primarily due to increased accounting and auditing fees.

General and administrative expenses for Fiscal 2003 increased by approximately $78,000, or 13.4%, to approximately $663,000 from approximately $585,000 in Fiscal 2002. The increase was primarily due to an increase in miscellaneous expenses.

Advertising and promotions expense for Fiscal 2003 decreased by approximately $59,000, or 7.1%, to approximately $768,000 from approximately $827,000 in Fiscal 2002. The increase was primarily due to a reduction in advertising expenditures.

Travel and entertainment expenses for Fiscal 2003 increased by approximately $39,000, or 17.4%, to approximately $260,000 from approximately $221,000 in Fiscal 2002. The increase was primarily due to an increase in miscellaneous expenses.

Depreciation and amortization for Fiscal 2003 increased by approximately $35,000, or 34.7%, to approximately $135,000 from approximately $100,000 in Fiscal 2002. The increase was primarily due to additions made during Fiscal 2002.

Net income for Fiscal 2003 increased by approximately $10.9 million, or 838.7%, to approximately $9.6 million from a loss of approximately $1.3 million in Fiscal 2002.

Total revenue for Fiscal 2002 increased approximately $9.2 million, or 221.3%, to approximately $13.4 million from $4.2 million for the year ended September 30, 2001, or Fiscal 2001. The increase was primarily due to increases in interest income on loans held for sale, interest income from retained interests, gain on sale of loans, income from loan servicing and decreases in the loss on interest rate swap contracts as well as the loss on securities sold, but not yet purchased. These increases were partially offset by decreases in interest income on securities purchased under resale agreements, interest income on interest rate swap contracts, gain on sale of retained interests and other income.

Interest income on loans held for sale for Fiscal 2002 increased by approximately $1.8 million, or 26.9%, to approximately $8.5 million from approximately $6.7 million in Fiscal 2001. The increase was due to an increase in the weighted average portfolio of loans held for sale in Fiscal 2002, approximately $89.2 million in Fiscal 2002 as compared to approximately $67.0 million in Fiscal 2001, and a decrease in the weighted average interest rate on the loans, approximately 9.54% in Fiscal 2002 as compared to approximately 10.01% in Fiscal 2001.

Interest income on securities purchased under resale agreements for Fiscal 2002 decreased by approximately $0.7 million, or 83.9%, to approximately $0.1 million from approximately $0.8 million in Fiscal 2001. The decrease was due to a decrease in the weighted average asset balance from approximately $20.5 million in Fiscal 2001 to approximately $9.0 million in Fiscal 2002. The weighted average yield on these assets also decreased from approximately 3.71% during Fiscal 2001 to approximately 1.35% during Fiscal 2002.

Interest income on interest rate swap contracts for Fiscal 2002 decreased by approximately $0.4 million, or 24%, to approximately $1.5 million from approximately $1.9 million in Fiscal 2001. The decrease was primarily due to a decrease in the weighted average interest rate received on the outstanding swap contracts, approximately 2.46% in Fiscal 2002 as compared to approximately 4.85% during Fiscal 2001. Somewhat mitigating the reduction in interest rates was an increase in the weighted average level of outstanding swap contracts, approximately $59.1 million during the Fiscal 2002 from approximately $39.4 million during Fiscal 2001.

Interest income from retained interests for Fiscal 2002 increased by approximately $0.3 million, or 24.7%, to approximately $1.5 million from approximately $1.2 million in Fiscal 2001. The increase was primarily due to an increase in the weighted average retained interest asset, approximately $7.5 million during Fiscal 2002, as compared to approximately $6.2 million during Fiscal 2001.

Gain on sale of loans for Fiscal 2002 was approximately $5.0 million as compared to $0 in Fiscal 2001. The increase resulted from our securitization that we completed in Fiscal 2002 compared to Fiscal 2001, in which we did not complete a securitization.

Total gain on sale of retained interests for Fiscal 2002 decreased by approximately $0.5 million, or 76.6%, to approximately $0.1 million from approximately $0.6 million in Fiscal 2001. The decrease was due to greater profitability on the retained interests which were sold during Fiscal 2001.

Loss on interest rate swap contracts for Fiscal 2002 decreased by approximately $3.1 million, or 49.1%, to approximately $3.2 million from approximately $6.3 million in Fiscal 2001. The decrease was primarily due to the market fluctuations and the composition of our hedging instruments.

Loss on securities sold, but not yet purchased for Fiscal 2002 decreased by approximately $0.5 million, or 38.9%, to approximately $0.9 million from approximately $1.4 million in Fiscal 2001. The decrease was primarily due to the market fluctuations and the composition of our hedging instruments.

Income from loan servicing for Fiscal 2002 increased by approximately $0.1 million, or 49.7%, to approximately $0.3 million from approximately $0.2 million in Fiscal 2001. The increase was primarily due to loan servicing income during Fiscal 2002 from an additional securitization that we completed during the first quarter of Fiscal 2002.

Other income for Fiscal 2002 decreased by approximately $81,000, or 16%, to approximately $429,000 from approximately $510,000 in Fiscal 2001. The decrease was primarily due to a decline in other fee income.

Total expenses for Fiscal 2002 increased by approximately $0.8 million, or 5.6%, to approximately $14.7 million from approximately $13.9 million in Fiscal 2001. The increase was primarily due to other than temporary decline in value of retained interests, increases in total interest on borrowings, interest expense on interest rate swap contracts, salaries and benefits and professional fees. The increases were partially offset by a decrease in interest expense on securities sold, but not yet purchased.

Total interest expense on borrowings for Fiscal 2002 increased by approximately $0.2 million, or 4.2%, to approximately $5.4 million from approximately $5.2 million in Fiscal 2001. The increase was primarily due to an increase in the weighted average debt balance during Fiscal 2002, offset slightly by a decrease in the weighted average interest rate on the debt. The weighted average debt balance was approximately $98.4 million during Fiscal 2002 as compared to approximately $70.7 million during Fiscal 2001. The weighted average interest rate on the outstanding borrowings was approximately 5.49% during Fiscal 2002 as compared to approximately 7.34% during Fiscal 2001.

Interest expense on securities sold, but not yet purchased for Fiscal 2002 decreased by approximately $0.7 million, or 56.6%, to approximately $0.5 million from approximately $1.2 million in Fiscal 2001. The weighted average balance of outstanding contracts during Fiscal 2002 was

approximately $9.0 million as compared to approximately $20.5 million during Fiscal 2001. The weighted average interest rate on the outstanding contracts also decreased slightly from approximately 5.67% during Fiscal 2001 to approximately 5.57% during Fiscal 2002.

Interest expense on interest rate swap contracts for Fiscal 2002 increased by approximately $0.7 million, or 31.3%, to approximately $3.2 million from approximately $2.5 million in Fiscal 2001. The increase was primarily due to the increase in the weighted average level of outstanding swap contracts, approximately $59.1 million during the Fiscal 2002 from approximately $39.4 million during Fiscal 2001. While the weighted average level of outstanding swap contracts increased, the weighted average interest rate decreased to approximately 5.45% during Fiscal 2002 from approximately 6.21% during Fiscal 2001.

Other than temporary decline in value of retained interests for Fiscal 2002 was approximately $0.2 million. This was a result of a loan default in the 2001-1 securitization. There was no other than temporary decline in value of retained interests during Fiscal 2001.

Facility fee expense for fiscal 2002 increased by $10,000, or 2.7%, to $385,000 from $375,000 in Fiscal 2001. The increase was due to the increase in the facility fee on the warehouse line of credit due to a temporary increase in the line of credit.

Salaries and benefits expense for Fiscal 2002 increased by approximately $0.3 million, or 11.7%, to approximately $2.9 million from approximately $2.6 million in Fiscal 2001. The increase was primarily due to an increase in salaries and bonuses paid to employees.

Professional fees for Fiscal 2002 increased by approximately $105,000, or 42.5%, to approximately $351,000 from approximately $246,000 in Fiscal 2001. The increase was primarily due to an increase in miscellaneous professional fees.

General and administrative expenses for Fiscal 2002 decreased by approximately $63,000, or 9.7%, to approximately $585,000 from approximately $648,000 in Fiscal 2001. The decrease was primarily due to efficiencies in office related expenses.

Advertising and promotions expense for Fiscal 2002 decreased by approximately $67,000, or 7.5%, to approximately $828,000 from approximately $895,000 in Fiscal 2001. The decrease was primarily due to efficiencies in advertising.

Travel and entertainment for Fiscal 2002 decreased by approximately $30,000, or 12%, to approximately $221,000 from approximately $251,000 in fiscal 2001. The decrease was primarily due to a decrease in airfare expense.

Depreciation and amortization for Fiscal 2002 increased by approximately $10,000, or 11.3%, to approximately $100,000 from approximately $90,000 in Fiscal 2001. The increase was primarily due to new additions of property and equipment in excess of disposals.

Net loss in Fiscal 2002 decreased by approximately $8.4 million, or 86.6%, to approximately $1.3 million from $9.7 million in Fiscal 2001.

As of September 30, 2003 and September 30, 2002, we had $492,198 and $246,932, respectively, in cash and cash equivalents. We invest cash on hand in short-term liquid investments. Our goal is to maintain a low cash balance. We generally fund new loan originations using borrowings under our existing warehouse line of credit and subordinated loans, and proceeds received upon the completion of loan securitizations.

As of September 30, 2003 and September 30, 2002, we had retained interests in loan securitizations of $7.3 million and $7.5 million, respectively. The decrease in retained interests in loan securitizations reflected the interest we retained in the Series 2003-1 Trust offset by the sale of our rated retained interest in the Series 2000-1 Trust.

As of September 30, 2003 our retained interests consisted of the following securities with estimated fair values as indicated:

Falcon Franchise Loan Trust Certificates, Series 1999-1 Class F	$	2,038,912
Falcon Franchise Loan Trust Certificates, Series 1999-1 Class G		964,897
Falcon Franchise Loan Trust Certificates, Series 2000-1 Class G		1,011,941
Falcon Auto Dealership Loan Trust Certificates, Series 2001-1 Class G		1,503,281
Falcon Auto Dealership Loan Trust Certificates, Series 2003-1 Class G		1,828,850

	$	7,347,881

We estimate the fair value of the retained interest by calculating the present value of the estimated expected future cash flows received by us, using a discount rate commensurate with the risk involved. As of September 30, 2003, we have experienced only two loan delinquencies with respect to our four loan securitization pools, one of which defaulted in March 2002 and resulted in a loss of $2.8 million, and no prepayments. The second loan delinquency relates to a loan in our 2003 securitization with an unpaid principal balance of $9.5 million that defaulted in September 2003. Although the second loan delinquency is not yet resolved, we have estimated the loss upon the resolution of this loan may range from $3.0 million to $3.5 million. Correspondingly, we have taken a charge of $0.4 million, which reflects our assessment of the reduction in value of our retained interest relating to estimated resolution of this loan. We cannot provide any assurance that the loss will fall within the range indicated.

Liquidity. Our short term liquidity requirements consist primarily of funds necessary to originate new loans to automotive dealers and to pay for other expenditures including interest and principal payments on our warehouse line and subordinated debt, net interest expense on our hedging activities, salaries and employee benefits, general and administrative expenses, advertising and promotions and capital expenditures.

Our primary sources of liquidity for the years ended September 30, 2003 and 2002 were net proceeds from the sale of loans, borrowings from subordinated loans and borrowings from a warehouse line of credit. We have historically funded our short-term liquidity requirements from these three sources.

We expect cash from additional borrowings on existing and future warehouse lines of credit, proceeds from the completion of additional securitizations, the proceeds of this offering and cash from operations to be adequate to support our operations for the next 12 months.

Loan Securitization Transactions. We sold at issuance $104.6 million of loan trust certificates through securitization transactions in 1999, $111.6 million in 2000, $122.2 million in 2001 and $123.4 million in 2003. Our securitization transactions are further described under the heading "Our Company—Our Loan Portfolio—Previous Securitizations" beginning on page 67. To finance our business, we are substantially dependent upon completing additional loan securitizations in the future. Factors that could affect our future ability to sell loans that we originate include investor demand, credit spreads relative to other investments and the general level of interest rates relative to other types of investments. We cannot provide any assurances that we will be able to complete additional loan securitizations on favorable terms or at all.

Borrowings. As of September 30, 2003 and September 30, 2002, we had outstanding borrowings totaling $107.6 million and $115.8 million, respectively.

We entered into a $150 million Revolving Warehouse Financing Agreement in January 1998 with SunAmerica Life Insurance Company, or SALIC, and ABN AMRO Bank, N.V., solely for the purpose of originating loans. SALIC, along with Goldman Sachs Mortgage Company, as a result of a participation agreement between the two entities, are the guarantors of the Revolving Warehouse Financing Agreement. As guarantors, each of the entities was paid fees of $1,166,204, $1,101,658 and $622,891 for the years ended September 30, 2003, 2002 and 2001, respectively. The fees are shown on the statements of operations within the caption "interest expense—related party." Interest is calculated using a 30-day commercial paper rate plus 300 basis points, which will be decreased to 200 basis points upon the completion of this offering. As of September 30, 2003 and September 30, 2002, the outstanding balance was $97.3 million and $97.3 million, respectively. We borrowed an additional $9.2 million to originate a loan after September 30, 2003. The interest rate as of September 30, 2003 and September 30, 2002 was 4.06% and 4.77%, respectively.

The warehouse credit line is secured by, among other things, all loans in our portfolio that have not been securitized. We expect to fund loans using our warehouse credit line until we complete a loan securitization, which generally means that we rely upon the warehouse credit line to fund loans for less than one year. All payments made by our customers in respect of such loans are applied on a monthly basis to pay outstanding fee and interest obligations under the warehouse credit line and to reduce the principal amount outstanding under the warehouse credit line by an amount equal to the portion of the payments on our loans that constitute payments of principal. Any amounts remaining after such application are paid to us.

The maturity date of our warehouse credit line is October 1, 2004. Borrowings under this credit line bear interest at a variable annual rate, calculated using a 30-day commercial paper rate plus 300 basis points, which will be decreased to 200 basis points upon the completion of this offering, but will increase to 250 basis points on May 1, 2004 if the warehouse credit line has not been prepaid in full and terminated by such time. If the warehouse credit line has not been prepaid and terminated prior to May 1, 2004, we will be required to pay a fee of $3 million. An additional fee of $1.5 million will be payable if the warehouse credit line has not been prepaid and terminated prior to October 1, 2004.

We expect to use approximately $76.3 million of the net proceeds from this offering to repay a portion of the outstanding balance on this loan.

We may not originate loans without the approval of SALIC and Goldman Sachs Mortgage Company. The availability of funds under this credit line is subject to, among other things, our compliance with specified financial covenants relating to net worth, net income, leverage ratio, limitations on capital expenditures and limitations on total indebtedness, as described below. Following the consummation of this offering, we are required under the warehouse credit line to maintain a ratio of consolidated total debt to consolidated net worth not in excess of 5:1, a consolidated net worth of not less than 80% of the net proceeds of this offering plus 75% of net proceeds of any subsequent issuance of our equity securities, and consolidated net income as of the end of any fiscal quarter other than the first fiscal quarter of 2004 of not less than a loss of $500,000. As of the end of the first fiscal quarter of 2004, our consolidated net income is not permitted to be less than a loss of $2 million. We generally may not maintain indebtedness outside the warehouse credit line after this offering other than indebtedness of up to $10 million to fund obligations under our hedging arrangements, purchase money indebtedness for the acquisition of assets not in excess of $1,000,000, indebtedness in connection with our securitization transactions and certain capital leases. The warehouse credit line also limits our consolidated capital expenditures to not more than $500,000 in any fiscal year. In the event that either Mr. Schwartz or Mr. Karp ceases to be employed by us as an executive officer for any reason other

than death, disability or incapacity, we will be prohibited from making additional borrowings under the warehouse credit line. The warehouse credit line also specifies various events that would allow the lenders to terminate the warehouse credit line in its entirety, including, among other things, the occurrence of a material adverse change in our business, financial condition or prospects, or a downgrade or other impairment of the rating on any notes issued in our securitization transactions. We recently received a waiver from the lenders in connection with the downgrades and ratings watch associated with our 2003 securitization.

The lenders under the warehouse credit line will fund up to 80% (currently 92%, but to be reduced to 80% upon the completion of this offering), the advance rate, of the principal amount of eligible loans that we originate that are in a principal amount of less than $10 million. In the case of loans in a principal amount of $10 million or more, the advance rate will be 70%, subject to certain additional amounts that may be available if our borrowings under the warehouse credit line exceed $80 million. We are not permitted to originate loans to any single customer in an aggregate principal amount equal to or in excess of $15 million. In addition to borrowings for loan origination purposes, we are permitted to make drawings for working capital purposes to the extent that we make a voluntary prepayment of the warehouse credit line with proceeds of this offering.

We are required to make prepayments under the warehouse credit line under certain circumstances. Among other things, in the event that a customer defaults on a scheduled loan payment that is not cured within 30 days, such loan will be treated as a defaulted receivable and we will be required to prepay the outstanding principal amount of the borrowings incurred under the warehouse credit line in respect of such defaulted receivable. In addition, we may also be required to make prepayments under certain circumstances upon a decrease in the aggregate present value of our loan portfolio. Specifically, in the event that certain lenders determine that the product of the advance rate (currently 92%, but to be reduced to 80% upon the completion of this offering) and the aggregate present value of the loans in our loan portfolio is less than the aggregate outstanding principal and accrued interest under the warehouse credit line, then we will be required within two business days of notice of such deficiency to prepay amounts borrowed under the warehouse credit line in such amount as is necessary to eliminate such deficiency. The most likely situation in which such prepayment would be required is in a rising interest rate environment in which we utilize all or substantially all availability under the warehouse credit line.

We are currently in discussions with potential lenders to enter into a replacement warehouse line of credit following completion of this offering. We cannot, however, provide any assurances that we will be able to enter into a replacement warehouse line of credit on favorable terms or at all.

We entered into a $19.3 million Amended and Restated Senior Subordinated Loan Agreement in January 1998 with Goldman Sachs Mortgage Company and SALIC. The agreement provides for a $5.0 million working capital loan, a $2.0 million hedge loan and $12.3 million for loan originations. As of September 30, 2003, there was $0.8 million outstanding used for working capital purposes, $0.0 million outstanding for hedge purposes and $8.0 million outstanding for loan originations. In addition, since September 30, 2003, we borrowed an additional $3.1 million under this senior subordinated loan to fund a loan commitment and to pay certain fees in connection with entering into an amendment to our warehouse credit line. The interest rate on the senior subordinated loan is 12%, with 9% payable in cash and 3% payable in kind, and the loan matures on October 1, 2004. We intend to use a portion of the proceeds from this offering to repay in full the outstanding balance under this senior subordinated loan.

We entered into a $0.5 million Junior Subordinated Loan Agreement in April 1999 with Falcon Auto Venture, LLC. The agreement provides for a $0.5 million working capital loan. As of

September 30, 2003 the outstanding balance was $0.5 million. The interest rate on the junior subordinated loan is 12%, with 9% payable in cash and 3% payable in kind, and the loan matures on October 1, 2004. We intend to use a portion of the proceeds from this offering to repay in full the outstanding balance under this junior subordinated loan.

We also have outstanding interest capitalization notes in the amount of approximately $1.0 million that represent the 3% interest capitalization on the senior subordinated loan and the junior subordinated loan referred to above. Interest on the capitalization notes is also at a rate of 12%, with 9% payable in cash and 3% payable in kind. We intend to use a portion of the proceeds from this offering to repay in full these interest capitalization notes.

As of September 30, 2003, we were obligated under noncancelable operating lease agreements for office space and computer equipment. The future minimum lease payments under these lease agreements at September 30, 2003 were:

We expect to upgrade our loan administration and accounting software in the next nine months at a cost of approximately $0.3 million. We do not anticipate incurring any other significant capital expenditures in the next 12 months.

We are involved in significant financing, risk management and other transactions, and have significant related party balances, with Goldman, Sachs & Co., an affiliate of MLQ Investors, L.P., SunAmerica Investments, Inc., SALIC, an affiliate of SunAmerica Investments, Inc., and Falcon Auto Venture, LLC both directly and indirectly through affiliates and subsidiaries of the entities, which are further described under the heading "Certain Relationships and Related Transactions" beginning on page 91. We enter into these transactions in the ordinary course of business and believe that the terms of these transactions are on market terms that could be obtained from unrelated third parties.

The following table sets forth the related party assets and liabilities included in the respective captions on our Statement of Financial Position at September 30, 2003 and September 30, 2002. The amounts reflect the related party transactions with Goldman, Sachs & Co., except where otherwise indicated and are as follows:

		September 30, 2003		September 30, 2002
Securities purchased under resale agreements		$	—	$	11,262,500
Due from broker			80,842		5,630,000
Restricted cash			1,038,169		1,984,774

	Total Assets	$	1,119,011	$	18,877,274

Borrowings ($4,856,014 and $555,913 at September 30, 2003 and $8,937,213 and $539,278 at September 30, 2002 related to SunAmerica Investments, Inc. and Falcon Auto Venture, LLC, respectively)		$	10,267,940	$	18,413,703
Securities sold, but not yet purchased			—		11,160,729
Accrued interest payable ($142,628 and $4,159 at September 30, 2003 and $175,028 and $4,034 at September 30, 2002 related to SunAmerica Investments, Inc. and Falcon Auto Venture, LLC, respectively)			289,414		1,185,483
Due to broker			—		663,273
Interest rate swap contracts			433,170		5,719,800

	Total Liabilities	$	10,990,524	$	37,142,988

Included in our Statement of Operations are revenues and expenses resulting from various financing, capital markets transactions and loan sales transactions. The following table sets forth the related party revenues and expenses included in the respective captions on our Statement of Operations

for the years ended September 30, 2003, 2002 and 2001. The amounts reflect the related party transactions with Goldman, Sachs & Co., except where otherwise indicated and are as follows:

		Year ended September 30,
		2003			2002			2001
Interest income on securities purchased under resale agreements		$	182,892		$	122,346		$	759,587
Interest income on interest rate swap contracts			401,969			1,455,250			1,913,545
Gain (loss) on sale of loans—fee expense			(1,414,936	)		(1,434,274	)		—
Gain (loss) on sale of retained interests			—			(19,238	)		—
Gain (loss) on interest rate swap contracts			250,530			(3,200,887	)		(6,289,101	)
Gain (loss) on securities sold, but not yet purchased			1,079,799			(857,174	)		(1,403,183	)

	Total Revenues	$	500,254		$	(3,933,977	)	$	(5,019,152	)

Interest expense on borrowings ($1,800,037 and $66,535 in 2003, $1,876,102 and $63,548 in 2002, and $1,135,724 and $38,121 in 2001 related to SunAmerica Investments, Inc. and Falcon Auto Venture, LLC, respectively)		$	3,666,609		$	3,815,752		$	2,309,569
Interest expense on securities sold, but not yet purchased			1,252,746			503,624			1,161,018
Interest expense on interest rate swap contracts			1,181,593			3,217,674			2,450,512
Facility fee expense ($187,500 in 2003, $192,500 in 2002, and $187,500 in 2001 related to SunAmerica Investments, Inc.)			375,000			385,000			375,000

	Total Expenses	$	6,475,948		$	7,922,050		$	6,296,099

Market risk refers to the risk of loss from adverse changes in the level of one or more market prices, rate indices, or other market factors. We are exposed to market risk primarily from changes in interest rates and credit spreads. These two main risks are very sensitive to a variety of factors including political, economic, monetary and tax policies and other factors outside of our control. As described below, we use some derivative financial instruments to manage or hedge interest rate risks related to our loans held for sale portfolio. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based on their credit ratings and other factors.

The primary interest rate exposure to which we are subject to relates to our fixed-rate loans held for sale portfolio, interest rate swaps and repurchase agreements, our floating rate warehouse line of credit and our retained interests in securitization pools. Any change in the general level of interest rates in the market can affect our net interest income in either a positive or negative manner. Net

interest income is the difference between the income earned from interest bearing assets less the expense incurred relating to interest bearing liabilities. Fluctuations in the interest rate environment can also affect our ability to acquire new loans, the value of our loans held for sale portfolio and our ability to sell the loans held for sale and the related income associated with a sale.

In order to protect against interest rate exposure on our loans held for sale portfolio, we enter into certain transactions, including short sales and purchases, securities resale and repurchase agreements, and interest rate swaps, to mitigate the effect that changes in interest rates and credit spreads have on the fair value of our fixed rate loan portfolio held for sale.

We have not historically and currently do not intend to enter into hedging transactions to mitigate our interest rate exposure relating to the value of our retained interests in securitization pools. The fair value of our loans held for sale portfolio can decline during periods of rising interest rates and widening credit spreads. Generally, we enter into these transactions when the rate is locked on a pending loan. We typically short U.S. Treasuries and invest the proceeds in repurchase agreements with Goldman, Sachs & Co., with U.S. Treasury notes as the underlying securities. In swap transactions, we will generally enter into an interest rate swap contract, receiving a floating rate of interest and paying a fixed rate of interest. The term of the swap contracts is determined by duration of the loans held for sale pool. We have a contractual obligation to settle the repurchase and swap agreements with Goldman, Sachs & Co. at the current fair value on the repurchase date.

The following table summarizes the fair values of certain of our financial instruments at September 30, 2003:

We determined the fair values included in the tables above based upon the best evidence available for each type of financial instrument, as discussed above in "—Critical Accounting Policies and Management Estimates—Derivative Instruments and Hedging Activities" on page 43. For example, for interest rate swap contracts, the fair values are based on securities dealers' estimated prices. For securities purchased under resale agreements, the fair values are based on market prices or securities dealers' estimated prices. For securities sold, but not yet purchased, the fair values are based on the quoted market prices of the underlying securities.

We are a fully integrated, self-advised, internally-managed specialty finance company focused solely on the business of originating and servicing loans to automotive dealers in the United States. We have also provided loans to select motorcycle dealers on a limited basis. Upon completion of this offering, we intend to elect to be taxed as a REIT for federal income tax purposes and will become the successor to Falcon Financial, LLC, which was organized in Delaware in May 1997.

Falcon Financial was formed to address the specialized capital needs of the automotive retailing industry. In addition to financing for new and used automobile inventories, many automotive dealerships require capital for a variety of other purposes, including the acquisition of other dealerships, the acquisition of dealership real estate, facility expansion and renovations, partner buyouts and refinancing of existing debt. Because other providers of long-term debt financing to automotive dealers such as the captive finance companies of automobile manufacturers and local and national banks traditionally have provided long term financing only to dealers that already have obtained from that provider financing of the dealer's new and used automobile inventory, we believe we are the only dedicated provider of long-term debt financing to automotive dealers in the United States.

We provide loans to automotive dealers based on their cash flow, collateralized in part by their real estate assets and in part by their business assets, including automobile parts and equipment and intangible property but not the dealership's automobile inventory, and certain other personal property. Historically, the value of the real estate collateral and business asset collateral together has exceeded the principal amount of the loans we originate. For our loan portfolio as of September 30, 2003, the value of the real estate collateral represented 82.1% of the outstanding principal amount of the loans and the value of the business asset collateral represented 80.0% of the outstanding principal amount of the loans, which together represent 162.1% of the outstanding principal amount of the loans in our loan portfolio. To date, our product offering has been limited to long-term, fixed-rate loans generally under $15 million. Following this offering, we intend to expand our loan product offerings and expect that we will be able to significantly expand our loan originations volume. We will need to determine the value of the underlying real estate at the time we intend to originate a loan in order to determine the extent to which the new loans that we originate constitute qualifying assets for purposes of the REIT asset tests and the extent to which interest earned on such loans constitutes qualifying income for purposes of the REIT income tests, as described below under the heading "Material Federal Income Tax Considerations—Income Tests" beginning on page 112. Through our extensive advertising efforts, active participation in industry-related events such as conferences and conventions, and our extensive calling program by our regionally located marketing representatives, we believe that we have established a credible and recognizable brand image among automotive dealers.

Since the closing of our first loan in February 1998 through September 30, 2003, we have originated 107 loans totaling approximately $640 million in aggregate initial principal amount. For the fiscal year ended September 30, 2003, we originated 17 loans totaling $147.1 million in aggregate initial principal amount and, as of September 30, 2003, our portfolio consisted of 14 loans with an aggregate outstanding principal balance of $105.9 million, and we had $28.2 million in outstanding loan commitments, of which we have funded $22.8 million since September 30, 2003. Our portfolio of 14 loans as of September 30, 2003 had an average principal amount outstanding of $7.6 million, a weighted-average remaining term of 175.7 months and a weighted-average interest rate of 8.96%. We believe that our strong credit performance has resulted from our disciplined and thorough underwriting of each loan. We have experienced only two loan delinquencies since our inception, one of which related to a loan in our 2001 securitization that defaulted in March 2002 and resulted in a loss of principal of $2.8 million. The second loan delinquency relates to a loan in our 2003 securitization with an unpaid principal balance of $9.5 million that defaulted in September 2003. Although the second loan delinquency is not yet resolved, we have estimated the loss upon the resolution of this loan may range from $3.0 million to $3.5 million. Correspondingly, we have taken a charge of $0.4 million, which reflects our assessment of the reduction in value of our retained interest relating to estimated resolution of this loan. We cannot provide any assurance that the loss will fall within the range indicated.

We have successfully securitized four pools of our loans in 1999, 2000, 2001 and 2003 totaling $517.0 million in aggregate principal amount at the date of securitization, and we continue to provide primary servicing for all of our securitized loans. All of our securitizations received ratings from two nationally recognized statistical ratings organizations. One of our securitizations, the 2003 securitization, has received a rating downgrade. We believe that this successful securitization track record enhances our ability to access the bond market for long-term non-recourse financing. Securitization is a highly effective source of funding because it allows us to match the maturity of our loan assets with the maturity of our debt.

Automotive retailing, with 2002 industry sales of approximately $817 billion, is the largest consumer retail sector in the United States. There were over 21,700 automotive dealers in the United States as of December 31, 2002. Automotive dealers accounted for all of the $405 billion of 2002 new vehicle sales, approximately 76% of the $257 billion of 2002 used vehicle sales and approximately 52% of the $155 billion of 2002 parts and service sales.

Dealerships typically are comprised of several business segments that perform differently in varying economic environments, including new vehicle sales, used vehicle sales, and parts and service. The parts and service operations of a dealership tend to be significantly more profitable with an average gross margin of 56.9% in 2002 than either used vehicle sales, which had an average gross margin of 11.1% in 2002 or new vehicle sales, which had an average gross margin of 5.9% in 2002. Accounting for an average of 50.2% of total gross profits in 2002, parts and service revenues can cover a significant portion of a dealership's fixed overhead expenses. We believe that the parts and service revenue stream tends to be counter-cyclical as consumers are more likely to repair older vehicles than replace them during times of economic hardship.

Automotive dealers historically have demonstrated profitability and stability. Average net profit margins for automotive dealers in the United States during the past 32 years have been positive, ranging from 0.6% to 2.5% of total sales, as indicated in the chart below. This consistent level of profitability among automotive dealers demonstrates why we believe in the strong creditworthiness of the sector.

In contrast to dealers, automotive manufacturers have experienced intense competition, overcapacity and fluctuating levels of sales. In response to fluctuations in demand and supply, manufacturers typically have provided assistance to dealers through incentives to stimulate demand and ameliorate overcapacity which has contributed, among other things, to a stable profit environment for automotive dealerships, as described above. Manufacturers, however, are constrained by their high fixed-cost structure, and consequently have experienced significant volatility in net profit margin, as indicated in the chart below.

Source: NADA Industry Analysis Division, Annual Reports and SEC filings of Ford Motor Company, General Motors Corporation and DaimlerChrysler AG/Chrysler Corporation.

The relationship between automotive dealers and manufacturers is typically governed by a written sales and service agreement, which specifies the locations at which the dealer has the right and the obligation to sell motor vehicles and related parts and products and to perform specified approved services. Although manufacturers do not guarantee exclusivity within specified territories, automotive dealers may challenge manufacturers' attempts to establish new franchises in the dealers' markets, and state regulators may deny applications to establish new dealerships for a number of reasons, including a determination that the manufacturer is adequately represented in the market. A sales and service agreement may impose requirements on the dealer concerning such matters as the appearance and configuration of showrooms, the amount and type of facilities and equipment for servicing vehicles, the maintenance of inventories of vehicles and parts, the maintenance of minimum net working capital and the training of personnel. In addition to closely monitoring compliance with these requirements, manufacturers require the dealers to submit a financial statement of operations on a monthly basis, which we also receive in our servicing department each month. Sales and service agreements typically require the manufacturer's prior approval of changes in management or transfers of ownership of the dealership, which the manufacturer may not withhold unreasonably. Most sales and service agreements expire after a specified period of time, ranging from one to five years and are renewed in the ordinary course of business. Sales and service agreements also typically provide for early termination or non-renewal by the manufacturer under specified circumstances such as change of management or ownership without manufacturer approval, insolvency or bankruptcy of the dealership, death or incapacity of the dealership manager, conviction of a dealership manager or owner of certain crimes, misrepresentation of certain information by the dealership or owner to the manufacturer, failure to

adequately operate the dealership, failure to maintain any license, permit or authorization required for the conduct of business, or material breach of other provisions of the sales and service agreement. The dealership is typically entitled to terminate the sales and service agreement at any time without cause, although many states' laws limit the ability of manufacturers to terminate or fail to renew franchises.

Automotive dealerships were originally established by automobile manufacturers for the distribution of new vehicles. In return for granting dealers distribution rights within specified territories, manufacturers exerted significant influence over their dealers by limiting the transferability of ownership in dealerships, designating the dealership's location, and managing the supply and composition of the dealership's inventory. These arrangements resulted in the proliferation of small, single-owner operations that, at their peak in the late 1940s, totaled almost 50,000. As a result of competitive, economic and political pressures during the 1970s and 1980s, significant changes and consolidation occurred in the automotive retail industry. One of the most significant changes was the increased penetration by foreign manufacturers and the resulting loss of market share by domestic manufacturers. The number of automotive dealerships has declined from approximately 24,700 as of January 1, 1983 to approximately 21,700 as of January 1, 2003. Consolidation has also helped to increase the average number of cars sold per dealership. In 1983 there were 8,600 dealerships with sales levels of less than 150 new vehicles per year, while at the end of 2002 there were only 2,390 such stores. In contrast, 6,952 dealerships now sell more than 750 new vehicles per year; in 1983 only 3,500 dealerships of that size existed, as shown in the chart below.

Although significant consolidation has taken place since the automotive retailing industry's inception, the industry today remains highly fragmented, with the largest 100 automotive dealers generating less than 17% of total sales revenues in 2002 and controlling less than 9% of all automotive dealerships. We believe that further consolidation is likely to occur in the future due to increased capital requirements of dealerships, the limited number of viable alternative exit strategies for dealership owners and the desire of certain manufacturers to strengthen their brand identity by consolidating their dealerships. We also believe that an opportunity exists for dealership groups with

access to capital and experience in identifying, acquiring and professionally managing dealerships, to acquire additional dealerships.

Automotive dealers historically have had limited access to capital. Typically, dealer inventory of new and used automobiles has been financed by the captive finance companies of the automobile manufacturers and local and national banks through floor plan financing. Outstanding borrowings under this type of credit fluctuate up and down with the sale of new and used cars and are secured by the new and used car inventory. These same financial intermediaries provide credit to finance dealership real estate as well as modest working capital lines of credit. Generally, the floor plan financing, real estate financing and working capital facilities are variable-rate and are personally guaranteed by the dealer.

Our experience indicates that the key factors in successfully lending to automotive dealers include providing a differentiated loan product with loan amounts based on cash flow as well as providing a full range of traditional real estate mortgage loans based on a dealership's real estate value, and maintaining a highly-specialized lending group with the underwriting knowledge of automotive dealer creditworthiness and capital needs.

While the captive finance companies of the automobile manufacturers and local and national banks traditionally have focused on providing floor plan financing, we are dedicated to serving all dealership financing needs other than floor plan financing. Our approach to dealership lending and determining loan amount is unique because we recognize and lend to automotive dealers based upon cash flow, with the loan being secured by real estate and business asset value. We believe we are able to more successfully meet automotive dealers' financing needs in terms of loan amount than other lenders based on this approach. For example, our cash flow-based loans enable qualified dealers to complete acquisitions of other dealerships that otherwise could not be completed without securing substantial new equity commitments from new partners or other sources. We believe the needs of automotive dealers in connection with these types of consolidation opportunities have been unmet by captive finance companies of the automobile manufacturers and local and national banks. In addition, banks typically offer only short-terms loans, while we offer long-term as well as short-term loans, which we believe is a distinct advantage.

We believe we are able to execute our approach successfully as a result of five core strengths:

Our target market for loan originations consists of approximately 13,000 automotive dealerships out of a total of approximately 21,700 dealerships in the United States that sell at least 400 new vehicles per year or have revenues exceeding the national average for automotive dealers. We assess our target market in terms of size, brand strength and location. Brand strength helps us predict success over the long term, while geographic considerations help to provide appropriate dealer diversification. These variables provide a preliminary benchmark in identifying the target market and automotive dealer prior to the more detailed underwriting process that follows once an application is received from a dealer.

The value of a dealership is critically dependent upon the strength of the brand of vehicles it sells. Brand strength is a function of the financial strength of the manufacturer of that brand, its market penetration, the demand characteristics of each market, the franchise assessment, brand sales per outlet and market share. We provide financing only to automotive dealers of generally recognized brands that have been approved by our credit committee. We have developed a proprietary brand scoring matrix that ranks each automobile brand based on the above criteria.

In order to achieve the necessary geographic diversification, we have established no geographic boundaries within the United States for our target market. Nevertheless, we focus efforts on those states that have the highest average sales per dealership and we generally avoid rural areas.

Following completion of this offering, we currently expect to provide our target market with the following loan products while operating our business so as to remain qualified as a REIT under the Internal Revenue Code:

Each of these loan products addresses different needs of automotive dealers that, based upon our experience, continue to remain unmet by existing providers either in terms of loan term, loan amount or rate structure. To date, we have offered only our fixed-rate cash flow-based loan product. By expanding our product offering as described above, we expect to address a multitude of additional needs and dealer preferences. In each case, we expect to provide loans that are short, medium or long term and partially or totally secured by real estate. In addition to the loan products described above, we may introduce additional products from time to time to capitalize on additional origination opportunities.

Since our inception, we have originated an aggregate of 107 loans to automotive dealers with an aggregate initial principal amount of approximately $640 million. After originating a sufficient number of loans to develop a pool available for securitization, our approach has been to subsequently finance the loans we originate in a securitization transaction. Through September 30, 2003, we have completed four securitization transactions with an average of 23 loans having an average aggregate initial principal amount of $129.3 million included in each securitization. Historically, we have structured our securitizations as off-balance sheet transactions and therefore have recorded gain on sale in connection with each securitization. Following this offering, we expect to structure our securitizations as on-balance sheet secured financings, and therefore do not expect to record any gain on sale in connection with future securitizations. Following this offering, we may seek to aggregate larger loan pools for securitization in order to obtain more favorable terms.

Our loan portfolio as of September 30, 2003 consisted of a pool of 14 fixed-rate, monthly pay loans. The loans had an aggregate balance as of September 30, 2003 of $105.9 million. All but one of the loans in our portfolio as of September 30, 2003 is fully amortizing and the remaining loan is a balloon loan. All of the loans were current in payment as of September 30, 2003. The loans are secured by (1) one or more first mortgages on fee simple or leasehold interests in real properties located in the United States or its territories and possessions used in connection with the operation of a new and used automobile dealership or motorcycle dealership, (2) security interests in business assets, including automobile parts and equipment and intangible property but not the dealership's automobile inventory, and specified other personal property, and (3) specified additional collateral. We originated the loans described below between January and September 2003. We have underwritten each of the loans in accordance with our guidelines that are described in "—Policy With Respect to Certain Activities—Loan Approval Policies" found on page 71.

Borrower(1)	Brand(s)	Original Principal Balance		Interest Rate		Term/ Amortization (in months)		Principal Balance as of September 30, 2003		Original Fixed Charge Coverage Ratio (2)	Loan to Enterprise Value (3)		Loan to Realty Value(4)
Team Land II, LLC Oxnard, CA	Nissan	$	6,500,000		9.24	%	96/173		$	6,372,433	1.56x		53.15	%	119.33	%
Telluride Enterprises, LLC(5) Palm Bay/Melbourne, FL	Chevrolet		18,500,000		8.84	%	180/180			18,254,639	1.58x		54.62	%	93.61	%
RCP Holdings, LLC/RCP Properties, LLC Columbia, SC	Ford		10,500,000		8.86	%	180/180			10,360,999	1.54x		60.08	%	122.98	%
S C Real Estate Holdings, LLC Spokane, WA	Chrysler		3,450,000		9.26	%	180/180			3,405,998	2.00x		53.47	%	157.69	%
Route 11 LLC/SJMJ LLC(6) Syracuse, NY	Dodge Chrysler Jeep		9,000,000		9.12	%	180/180			8,883,701	1.68x		49.26	%	98.24	%
Quinlan Enterprises, LLC Knoxville, TN	Dodge		9,000,000		8.87	%	240/240			8,933,309	1.90x		70.79	%	199.63	%
Kaspar Drive, LLC Flagstaff, AZ	Toyota		3,100,000		9.31	%	180/180			3,069,121	1.61x		60.96	%	143.75	%
Dickson City Realty LLC/ Middletown Vehicle Realty, LLC Middletown, NY Scranton, PA	Hyundai Pontiac Buick, GMC		5,700,000		9.32	%	180/180			5,643,277	2.21x		68.57	%	146.20	%
CT Real Estate Investments, Inc. St. Croix, USVI	Toyota Chrysler Dodge Jeep		2,500,000		8.90	%	180/180			2,480,486	2.04x		45.30	%	120.06	%
United Group, LLC Passaic, NJ Clifton, NJ	Honda		10,000,000		8.14	%	180/180			9,945,824	1.50x		53.46	%	89.40	%
A-Man(K), Inc. Lima, OH	Ford		7,300,000		8.40	%	180/180			7,261,468	1.51x		63.81	%	111.89	%
Koons of Alexandria, LLC(7) Alexandria, VA	GMC Buick Pontiac Mitsubishi		14,100,000		9.47	%	180/180			14,100,000	1.62x		75.00	%	108.46	%
Pensare Land Development, LLC Laurel, MD	Acura Nissan	7,150,000		9.22	%	180/180		7,150,000		1.67x	74.87	%	162.50	%
Total portfolio/Weighted average(8)		$	106,800,000		8.96	%			$	105,861,254	1.67x		61.26	%	121.80	%

Due Dates. All of our loans provide for scheduled payments of principal and/or interest to be due on the first day of each month in arrears.

Loan Rates; Calculations of Interest. All of the loans bear interest at a rate per annum that is fixed for the remaining term of each loan. As of September 30, 2003, the loan rates range from 8.14% to 9.47% per annum and the weighted average loan rate of the loans is 8.96% per annum. All of the loans accrue interest on an Actual/360 Basis.

Amortization of Principal. All of the loans except one are fully amortizing, and the remaining loan is a balloon loan. As of September 30, 2003, the weighted average remaining term to stated maturity of the loans was 175.7 months. The original amortization schedule of the loans ranges from 96 to 240 months. None of our loans permit negative amortization or the deferral of accrued interest.

Prepayment and Defeasance Provisions. All of the loans prohibit principal prepayments, in whole or in part, prior to a specified date followed by a specified period during which any principal prepayment is required to be accompanied by a prepayment charge or yield maintenance charge. In addition, some of the loans for which prepayment charges and yield maintenance charges are payable have terms that provide for the payment of such prepayment charges or yield maintenance charges in connection with some involuntary prepayments of principal.

Our loans provide for a right of defeasance on any payment date under the note, upon sixty days prior written notice. Specified requirements set forth in the loan documents must be satisfied including the requirement that no event of default under the loan then exists. The defeasance collateral must be direct, non-callable and non-redeemable obligations of the United States for the payment of which its full faith and credit is pledged.

Covenants. In general, each of the borrowers, which typically are bankruptcy remote, special purpose entities which own the dealership real estate, and the related guarantors, which typically are the dealership operating entities, is required to comply with, among others, the following loan covenants:

Guarantees. Our loans generally have the benefit of two or more continuing guarantees. The borrower is typically a special purpose entity established by the dealer. The first guarantee is given by

the entity that operates the related dealership and is an absolute and unconditional guarantee of the borrower's obligations under the note. This full guarantee is secured by a security interest in the personalty of the guarantor. This personalty excludes motor vehicles and certain other personal property, and the related security interest does not constitute a first priority lien on such personalty in most cases. In addition, the guarantors may have indebtedness other than the related loans, and the personalty securing the loan may be subject to some other permitted encumbrances. The second guarantee generally given in connection with each of the loans is given by individuals designated by us and involved with the dealerships. These guarantees are absolute in some cases and limited in other cases. However, we typically cannot enforce the second guarantee until the occurrence of specified "trigger events" such as fraud, intentional damage to the collateral, intentional acts that impair our perfection in the collateral, the voluntary imposition of non-permitted encumbrances on the collateral, a voluntary act of bankruptcy, dissolution or insolvency by the borrower or a guarantor, and the unauthorized relocation of the dealership or the competition by an affiliate that violates a restricted "radius" within which no competition from an affiliate is permitted.

Cross-Default and Cross-Collateralization. To the extent that any loan is evidenced by more than one note or secured by more than one mortgaged property, the related notes are cross-collateralized by the related mortgaged properties and are cross-defaulted to each other.

We sold at issuance $104.6 million of loan trust certificates through securitization transactions in 1999, $111.6 million in 2000, $122.2 million in 2001 and $123.4 million in 2003. The certificates represent beneficial interests in one or more trust funds established by our special purpose bankruptcy remote subsidiary. Our future securitizations, which will be on-balance sheet, will also be conducted through a special purpose bankruptcy remote subsidiary. The trust fund assets consist primarily of bonds issued by a trust established by the special purpose subsidiary. The bonds are generally secured by loans secured by interests in real estate used in the operation of automotive dealerships and also secured by a lien on the business assets other than automobile inventory and certain other personal property of those dealerships.

1999. The assets of the 1999 trust estate consist primarily of 20 fixed-rate, monthly pay loans with an aggregate initial principal balance of approximately $115.0 million. The loan rates range from 8.56% to 11.93% and the loans had a weighted average rate of 10.03% as of the date of securitization. As of the date of securitization, the loans had a weighted average fixed charge coverage ratio, or FCCR, of 1.69x based upon the FCCR of the loans as of origination. FCCR represents the ratio of the dealer's earnings before interest, taxes, depreciation and amortization as adjusted by us for the twelve months prior to the loan origination date divided by pro forma fixed charges for that period. The loans had a weighted average loan to enterprise value, which is the ratio of the principal of the loan as of the date of securitization to the value of all of the collateral that secures the loan, including real assets and business assets of the dealership, of 56.30%. The loans had a weighted average loan to realty value, which is the ratio of the principal of the loan as of the date of securitization to the replacement cost value of the real estate that secures the loan, of 155.02%. Grantor trust certificates were issued in seven classes with credit ratings ranging from Baa2 (Moody's Investors Service) or BB (Fitch Ratings, formerly known as Duff & Phelps) to Aaa (Moody's) or AAA (Fitch Ratings). We initially retained one class of unrated certificates with an initial face value of $3.5 million and another class of unrated certificates with an initial face value of $6.9 million and later sold 49% of the most junior unrated retained interest. There have been no downgrades of any certificates in this securitization.

2000. The 2000 trust estate consists of 24 fixed-rate, monthly pay loans with an aggregate initial principal balance of approximately $122.6 million. The loan rates range from 10.23% to 11.51% and the loans had a weighted average rate of 10.73% as of the date of securitization. The loans had a weighted average FCCR of 1.70x, a weighted average loan to enterprise value of 54.02% and a weighted average

loan to realty value of 140.16% (excluding loans not secured by real estate), as of the date of securitization. Grantor trust certificates were issued in seven classes with credit ratings ranging from Ba2 (Moody's) or BB- (Fitch Ratings) to Aaa (Moody's) or AAA (Fitch Ratings). We initially retained rated certificates with an initial face value of $3.7 million and unrated certificates with an initial face value of $7.4 million and later sold 49% of the unrated retained interest and 100% of the rated retained interest. There have been no downgrades of any certificates in this securitization.

2001. The 2001 trust estate consists of 26 fixed-rate, monthly pay loans and one participation interest in such a loan with an aggregate initial principal balance of approximately $140.8 million. The loan rates range from 9.23% to 11.38% and the loans had a weighted average rate of 9.92% as of the date of securitization. The loans had a weighted average FCCR of 1.77x, a weighted average loan to enterprise value of 57.55% and a weighted average loan to realty value of 155.25% (excluding loans not secured by real estate), as of the date of securitization. Grantor trust certificates were issued in seven classes with credit ratings ranging from Ba2 (Moody's) or BB (Fitch Ratings) to Aaa (Moody's) or AAA (Fitch Ratings). We initially retained rated certificates with an initial face value of $5.6 million and unrated certificates with an initial face value of $12.6 million and later sold 49% of the unrated retained interest and 100% of the rated retained interest. There have been no downgrades of any certificates in this securitization.

2003. The 2003 trust estate consists of 21 fixed-rate, monthly pay loans, one participation interest in such a loan and three balloon payment loans with an aggregate initial principal balance of approximately $141.1 million. The loan rates range from 8.875% to 10.480% and the loans had a weighted average rate of 9.643% as of the date of securitization. The loans had a weighted average FCCR of 2.03x, a weighted average loan to enterprise value of 60.18% and a weighted average loan to realty value of 151.87% (excluding loans not secured by real estate), as of the date of securitization. Grantor trust certificates were issued in eight classes with credit ratings ranging from B3 (Moody's) or B (Fitch Ratings) to Aaa (Moody's) or AAA (Fitch Ratings). We initially retained rated certificates with an initial face value of $6.3 million and unrated certificates with an initial face value of $11.3 million and later sold 100% of the rated retained interest. In October 2003, Moody's downgraded the Class A-1 and A-2 certificates in our 2003 securitization from Aaa to Aa1, the Class B certificates from Aa2 to Aa3, the Class C certificates from A2 to A3, the Class D certificates from Baa2 to Baa3, the Class E certificates from Ba2 to Ba3, and the Class F certificates from B3 to Caa2. Recently, Moody's further downgraded the Class A-1 and A-2 certificates in this securitization from Aa1 to Aa2, the Class B certificates from Aa3 to A1, the Class C certificates from A3 to Baa1, the Class D certificates from Baa3 to Ba1, the Class E certificates from Ba3 to B3, and the Class F certificates from Caa2 to Caa3. Fitch Ratings recently downgraded the Class E certificates in this securitization from BB to B+ and the Class F certificates from B to CCC. Additionally, Fitch Ratings placed the Class B, C, D, E and F certificates on rating watch for potential downgrade. Fitch Ratings affirmed the Class A certificates at AAA.

Moody's Ratings. The following explains the ratings provided by Moody's. The credit ratings of the retained certificates described above do not represent a rating of the securities offered in this prospectus.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranging; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

We have created an integrated approach to our loan origination and underwriting approval process that effectively combines the skills of our professionals with our proprietary information systems. As a result, we have developed a reputation for timely responses to prospective customers, efficient underwriting and approval processes and prompt closings.

To generate loan origination opportunities, we actively market our business through our network of regional marketing representatives, our extensive advertising campaign, targeted direct mail efforts, participation in industry conferences attended by prospective customers and the Internet. When the need for capital arises, an automotive dealer will typically make contact with us through our national telephone call center. In response to a call, we will immediately assign a nearby regional market representative to follow up with the dealer and request, among other things, financial information on the dealership(s) in connection with the proposed transaction.

After receiving financial and other information from the dealer, our underwriting officer enters the basic transaction data into our proprietary database. Utilizing our proprietary scoring and loan sizing model, our underwriting department makes a preliminary determination whether to proceed with the prospective dealer. If our underwriting department determines that the potential transaction meets our initial credit standards, then it prepares a formal proposal letter. If the dealer accepts the terms of the financing as outlined in the proposal letter, we typically require that the prospective customer remit a good faith deposit to cover a portion of our direct out-of-pocket expenses as well as the due diligence and other expenses that we incur in connection with the proposed transaction. Once we receive this deposit, we begin the formal loan underwriting and third party due diligence process. Our underwriting department undertakes this process in accordance with our underwriting procedures and evaluation criteria, as described in "—Policy With Respect to Certain Activities—Underwriting" beginning on page 71. Generally within 30 days of receipt of the deposit and acceptance of the proposal letter by the dealer, a formal and detailed loan submission memorandum describing and analyzing the proposed transaction is circulated to the members of our credit committee. If our credit committee approves the proposed loan, we will issue a commitment letter. If the dealer accepts the terms and conditions as set forth in the commitment letter, we begin the loan documentation process. The legal aspects of our loan closings are typically outsourced to outside counsel who document and close the loans under the supervision of our in-house personnel. The legal costs we incur in documenting and closing our loan transactions are charged to our customers. From start to finish, our loan origination, underwriting and approval process generally takes between 45 to 60 days.

We also act as primary servicer and special servicer of the loans in each of the loan securitizations. As primary servicer, we collect a monthly manufacturers statement and semi-annual financial statement and compliance certificates from each borrower and notify the master servicer of any default revealed by such review. We receive a monthly primary servicing fee based on a percentage of the outstanding principal amount of each loan. As special servicer, we are responsible for servicing and administering loans as to which certain defaults occur and receive fees based on the principal amount of loans during the time that we service such loans as special servicer. We also receive fees for loans that cease to be in default and in connection with the payout of any liquidation or insurance proceeds on loans that we serve as special servicer.

Our board of trustees has adopted policies with respect to certain activities, including the origination of loans, as discussed below. These policies may be amended or revised from time to time at the discretion of our board of trustees without a vote of our shareholders. Any change to any of

these policies would be made by our board, however, only after a review and analysis of that change, in light of then existing business and other circumstances, and then only if, in the exercise of their business judgment, they believe it is advisable to do so in our and our shareholders' best interests.

The unanimous approval of our credit committee is required before we make a loan. The three members of our credit committee are our chief executive officer, our president and our chief credit officer. The credit committee meets frequently on an as-needed basis to evaluate potential loans. Our board of trustees must approve loans in excess of $35 million.

We originate loans in accordance with our underwriting guidelines and standards, subject to limited exceptions, the scope of which is approved by our board. Pursuant to these underwriting standards, we conduct extensive due diligence and quantitative and qualitative analysis of all prospective customers seeking a loan and any of their dealerships that will be used as collateral. This analysis is specifically tailored to the automotive retailing sector to determine the ability of a dealer to meet its obligations under the proposed loan and to maintain the ongoing viability and value of the dealership.

After this offering, we plan to expand our offering of loan products to include variable-rate cash flow-based loans and fixed-rate and variable-rate real estate mortgage loans as described more fully above under the heading "Our Loan Products." Some of these loans, among other differences, may have loan amounts based upon only real estate value rather than business asset value and cash flow coverage and may have shorter terms than the loans we currently offer. Accordingly, in our evaluation of these new loan products we may emphasize different criteria than we currently emphasize. We may also utilize different underwriting procedures, in each case as will be determined by our board of trustees without a vote of our shareholders. Any proposed changes to our underwriting guidelines must be approved by our board of trustees and must be in accordance with the terms and conditions of our warehouse credit line.

Below is a summary of our existing underwriting procedures and evaluation criteria.

Due Diligence. Once a prospective loan transaction has been identified, we perform comprehensive due diligence to assess the credit risks of the proposed transaction. As part of this process, our underwriting department works with our other internal departments and outside third party vendors to prepare a detailed memorandum which typically includes, among other things, the following information, which is then used by our underwriting department, our chief credit officer and our credit committee to ascertain and evaluate the credit risks of a loan:

In addition, all credit decisions are subject to our receipt of acceptable third party due diligence reports, which generally include a site and location analysis, environmental site assessment, accountant agreed upon procedures, collateral appraisal and background investigation, as described below.

Quantitative Analysis. We conduct extensive quantitative analysis of prospective loan transactions, including examining revenue trends, profitability, capitalization and fixed charge coverage for the dealer. This enables us to determine the financial capabilities of the dealer, the manner in which the dealership has been operated and the ability of the dealership to support the repayment of the prospective loan. Our financial analysis of a dealer covers a detailed three-year performance assessment. Our historic and pro forma cash flow analysis measures the ability of the dealer to service total debt and all other fixed obligations. The primary determinant for this measure is the fixed charge coverage ratio, or FCCR, which represents the ratio of the dealer's cash flow for the twelve months prior to the loan origination date divided by pro forma fixed charges for such period.

Qualitative Analysis. Through our staff of underwriters and third party diligence vendors, we also evaluate and consider a number of qualitative factors in making our credit decisions, including the following:

Approved Brands. We believe that strong automobile brands equate to a higher likelihood of individual automotive dealer success. This in turn, we believe, mitigates the lending risk associated with providing a loan to the dealer. As such, before we develop a lending program for dealers of any brand of motor vehicles, we conduct a detailed "Concept Review" of the related manufacturer's makes and models, as described below.

We provide financing only to dealers of approved brands. Each approved brand is supported by a thorough due diligence of the brand and its franchise system. The results of the brand due diligence are compiled into a "Brand Book" maintained and updated for each approved brand. The Brand Books are maintained and generally updated regularly by our underwriting department with information from a number of key industry sources.

Accountant Agreed Upon Procedures. To assist in the evaluation of a dealer's management and systems, we retain an accounting firm that specializes in the automotive retailing industry to conduct certain agreed upon procedures for each dealer applicant. The accounting firm provides the dealer with an industry specific internal control questionnaire developed by the accounting firm and us. The accounting firm facilitates completion of the questionnaire generally by meeting on-site with the dealer and its financial managers. The accounting firm also performs compliance testing on selected internal control procedures of the dealer.

Environmental Due Diligence. We obtain an environmental assessment for all real estate serving as collateral for a loan. We require the environmental assessment, which is completed by a third-party environmental consultant, to contain a Phase I report to provide us with an assessment concerning environmental conditions identified in the report as they existed on the property. We require the Phase I reports to be completed utilizing generally accepted Phase I industry standards in accordance with the American Society for Testing and Materials Standard E 1527-00 and our scope of work. Our scope of work includes an evaluation of:

If the Phase I report suggests that it is appropriate to undertake further investigation, we will undertake a Phase II investigation. If the Phase II investigation identifies an environmental problem, then we require the dealer either to remediate the problem prior to closing a loan or within a time frame acceptable to us following closing of the loan. In the case of post-closing remediation, we will hold back from the loan proceeds and place into escrow an amount necessary to complete the work pursuant to the Phase II protocol, plus a contingency amount.

Other than our policies with respect to loan originations discussed above, we do not have a policy limiting our ability to make loans to other persons.

As disclosed elsewhere in this prospectus, we have incurred debt since our formation in order to fund our operations and loan originations. We entered into a $150 million Revolving Warehouse Financing Agreement in January 1998 with SunAmerica Life Insurance Company and ABN AMRO Bank, N.V. solely for the purpose of originating loans. The maturity date is October 1, 2004. Interest is calculated using a 30-day commercial paper rate plus 300 basis points, which will be decreased to 200 basis points upon the completion of this offering, but will increase to 250 basis points on May 1, 2004 if the warehouse credit line has not been prepaid in full and terminated by such time. If the warehouse credit line has not been prepaid and terminated prior to May 1, 2004, we will be required to pay a fee of $3 million. An additional fee of $1.5 million will be payable if the warehouse credit line has not been prepaid and terminated prior to October 1, 2004. We plan to repay approximately $76.3 million of the outstanding balance of $97.3 million as of September 30, 2003 with the proceeds of this offering. We currently are in discussions with potential lenders to enter into a replacement warehouse credit line following completion of this offering.

We may not originate loans without the approval of certain of the lenders under the warehouse credit line. The availability of funds under this credit line is subject to, among other things, our compliance with specified financial covenants relating to net worth, net income, leverage ratio, limitations on capital expenditures and limitations on total indebtedness. In addition, if either Mr. Schwartz or Mr. Karp ceases to be employed by us as an executive officer for any reason other than death, disability or incapacity, we will be prohibited from making additional borrowings under the warehouse credit line.

We are required to make prepayments under the warehouse credit line under certain circumstances. Among other things, in the event that a customer defaults on a scheduled loan payment

that is not cured within 30 days, such loan will be treated as a defaulted receivable and we will be required to prepay the outstanding principal amount of the borrowings incurred under the warehouse credit line in respect of such defaulted receivable. In addition, we may also be required to make prepayments under certain circumstances upon a decrease in the aggregate present value of our loan portfolio. Specifically, in the event that certain lenders determine that the product of the advance rate (currently 92%, but to be reduced to 80% upon the completion of this offering) and the aggregate present value of the loans in our loan portfolio is less than the aggregate outstanding principal and accrued interest under the warehouse credit line, then we will be required within two days of notice of such deficiency to prepay amounts borrowed under the warehouse credit line in such amount as is necessary to eliminate such deficiency. The most likely situation in which such prepayment would be required is in a rising interest rate environment in which we utilize all or substantially all availability under the warehouse credit line.

In addition, we entered into a $19.3 million Senior Subordinated Loan Agreement in January 1998 with Goldman Sachs Mortgage Company and SunAmerica Life Insurance Company. This agreement provides for a $5.0 million working capital loan, $2.0 million hedge loan and $12.3 million for loan originations. The interest rate is 12%, with 9% payable in cash and 3% accrued and capitalized, and the loan matures on October 1, 2004. The balance under the Senior Subordinated Loan Agreement as of September 30, 2003 was $9.7 million. In April 1999, we entered into a $0.5 million Junior Subordinated Loan Agreement with Falcon Auto Venture LLC, an entity controlled by our chief executive officer, our president and a former executive officer of our company. The interest rate is 12%, with 9% payable in cash and 3% accrued and capitalized, and the loan matures on October 1, 2004. The balance under the Junior Subordinated Loan Agreement as of September 30, 2003 was $0.6 million. We plan to repay in full the outstanding balance under the Senior Subordinated Loan Agreement and the outstanding balance under the Junior Subordinated Loan Agreement with the proceeds of this offering.

Our board will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of indebtedness, including the principal amount of loans to be originated with debt financing, the estimated value of our loan portfolio upon refinancing, and the ability of our loan portfolio and our company as a whole to generate cash flow to cover expected debt service.

Generally speaking, although we may incur any of the forms of indebtedness described below, we intend to focus primarily on financing future growth through our existing and future warehouse credit lines and through the financing of l

	Per Share	Total


Public offering price	$	$

Underwriting discount	$	$

Proceeds, before expenses, to us	$	$

Common shares offered		12,500,000
Common shares outstanding after this offering		14,105,800(1)
Use of proceeds		We estimate that the net proceeds that we receive in this offering will be approximately $114.7 million, based upon an assumed initial public offering price of $10.00 per share, which is the mid-point of the range set forth on the cover of this prospectus, and after deducting estimated underwriting discounts and estimated offering expenses payable by us. If the underwriters' over-allotment option is exercised in full, our net proceeds will be approximately $132.0 million after deducting estimated underwriting discounts and estimated offering expenses payable by us.
		We expect to use approximately $89.7 million in aggregate or 78.4% of the anticipated net proceeds from this offering to repay outstanding indebtedness owed to or guaranteed by SunAmerica Life Insurance Company, Goldman Sachs Mortgage Company and Falcon Auto Venture, LLC (our chief executive officer and president are its managing members), each of which were founding members of Falcon Financial, LLC. See "Use of Proceeds" on page 29 and "Certain Relationships and Related Transactions" on page 91.
Risk Factors		See "Risk Factors" beginning on page 9 and other information included in this prospectus for a discussion of factors that you should consider before investing in our common shares.
Nasdaq National Market symbol		FLCN

			Years ended September 30,
			2003		2002			2001			2000(2)			1999
Statement of Operations Data (1):
Revenues
	Interest income on loans held for sale		$	8,073,880	$	8,512,415		$	6,709,110		$	6,668,590		$	5,587,583
	Interest income on securities purchased under resale agreements—related party			182,892		122,346			759,587			2,137,000			203,730
	Interest income on interest rate swap contracts—related party			401,969		1,455,250			1,913,545			—			—
	Interest income from retained interests			1,377,052		1,475,891			1,183,889			707,358			119,593
	Gain on sale of loans			10,682,773		5,010,258			—			11,475,541			2,401,847
	Gain on sale of retained interests			850,874		136,469			582,578			—			—
	Gain (loss) on sale of interest rate swap contracts—related party			250,530		(3,200,887	)		(6,289,101	)		—			—
	Gain (loss) on securities sold, but not yet purchased—related party			1,079,799		(857,174	)		(1,403,183	)		(1,479,573	)		6,132,339
	Income from loan servicing			395,541		294,899			196,965			104,589			16,444
	Other income			579,673		428,598			510,293			173,013			183,453

		Total revenues		23,874,983		13,378,065			4,163,683			19,786,518			14,644,989
Expenses
	Interest expense on borrowings			4,769,299		5,405,567			5,188,526			6,631,986			5,312,334
	Interest expense on securities sold, but not yet purchased—related party			1,252,746		503,624			1,161,018			2,504,183			1,415,460
	Interest expense on interest rate swap contracts—related party			1,181,593		3,217,674			2,450,512			—			—
	Facility fee expense—related party			375,000		385,000			375,000			343,750			—
	Other than temporary decline in value of retained interests			422,477		178,251			—			—			—
	Other expenses			6,114,303		4,890,399			4,642,195			4,375,340			3,011,480
	Depreciation and amortization			135,180		100,360			90,177			93,642			72,448

		Total expenses		14,250,598		14,680,875			13,907,428			13,948,901			9,811,722
		Cumulative effect of change in accounting principle		—		—			—			—			(32,131	)

		Net income (loss)	$	9,624,385	$	(1,302,810	)	$	(9,743,745	)	$	5,837,617		$	4,801,136

		As of September 30,
		2003	2002	2001	2000(2)	1999
Statement of Financial Position Data:
	Cash and cash equivalents	492,198	246,932	2,968,294	455,503	359,218
	Loans held for sale, net	105,319,616	104,754,699	146,365,550	—	3,180,000
	Securities purchased under resale agreements—related party	—	11,262,500	24,933,125	—	2,556,250
	Retained interests in loan securitization	7,347,881	7,508,193	4,793,617	6,457,822	3,173,477
	Total assets	116,045,627	133,036,246	190,406,924	7,566,530	9,754,991
	Borrowings	107,585,194	115,755,781	155,443,803	964,902	7,297,052
	Total liabilities	111,468,994	137,628,203	195,139,665	2,483,411	10,844,145
Fair Value of Financial Instruments Data:
	Loans held for sale, net—carrying amount	105,319,616	104,754,699	146,365,550	—	3,180,000
	Loans held for sale, net—fair value	111,638,793	113,281,731	152,254,304	—	3,180,000

			September 30, 2003
			Actual (Falcon Financial, LLC)		As Adjusted (Falcon Financial Investment Trust)
Liabilities:
	Borrowings—Warehouse line of credit		$	97,317,254	$	41,685,194
	Borrowings—Senior subordinated loan			9,712,027		—
	Borrowings—Junior subordinated loan			555,913		—
	Other liabilities			3,883,800		3,883,800

		Total liabilities		111,468,994		45,568,994

Members'/Shareholders' equity:
	Members' capital			900,000		—
	Preferred shares (50,000,000 shares authorized, par value $0.01 per share; no shares outstanding, actual or as adjusted)			—		—
	Common shares (100,000,000 shares authorized, par value $0.01 per share; 14,105,800 shares outstanding, as adjusted)			—		141,058
	Additional paid-in capital			—		128,637,752
	Deferred compensation expense			—		(3,183,000	)
	Accumulated surplus			2,271,027		—
	Accumulated other comprehensive income			1,405,606		—

		Total members'/shareholders' equity		4,576,633		125,595,810

		Total liabilities and members'/shareholders' equity	$	116,045,627	$	171,164,804

		Shares Purchased Assuming No Exercise of Underwriters' Over- Allotment Option
				Total Consideration
				Total Consideration			Average Price Per Share
		Number	Percentage	Amount		Percentage	Average Price Per Share
Existing shareholders		1,605,800	11.4	$	10,895,810	8.0	$	6.79	(1)
New investors		12,500,000	88.6		125,000,000	92.0	$	10.00

	Total	14,105,800	100.0	$	135,895,810	100.0

2004	$	186,198
2005		196,002
2006		205,800
2007		215,598
2008		225,402
Thereafter		864,852

	$	1,893,852

	2003			2004	2005	2006	2007	Thereafter		Total		Fair Value
Assets
Loans Held for Sale	$	105,319,616		—	—	—	—	—		105,319,616		111,638,793
Average Interest Rate		8.96	%							8.96	%
Retained Interest in Securitization		—		—	—	—	—	7,347,881		7,347,881		7,347,881
Average Interest Rate		—		—	—	—	—	22.347	%	22.347	%
Interest Rate Derivatives
Interest Rate Swaps:
Variable to Fixed(1)		—		—	—	—	—	70,000,000		70,000,000		433,170
Average Pay Rate		—		—	—	—	—	3.75	%	3.75	%
Average Receive Rate		—		—	—	—	—	variable(2)		variable(2)
Borrowings
Warehouse line of credit—variable rate	$	97,317,254		—	—	—	—	—		97,317,254		97,317,254
Average Interest Rate		variable(1)		—	—	—	—	—
Subordinated loans and interest capitalization notes—fixed rate	$	10,267,940		—	—	—	—	—		10,267,940		10,267,940
Average Interest Rate		12.00	%	—	—	—	—	—		12.00	%

	Stifel, Nicolaus & Company
	Incorporated