4 Common Questions About Private Lenders
Private lenders offer an increasingly popular source of financing for members of our development community.
However, there is still a lot of confusion surrounding lenders like Evergreen Private Finance.
To help demystify private lenders, we’ve put together concrete answers to four of the most common questions we hear:
- What is a private lender?
- Who borrows from a private lender?
- How can I get the most out of borrowing from a private lender?
- How do I find the right private lender for me?
Let’s dig in.
Question 1: What is a private lender?
Private lenders are privately-held companies that have greater flexibility than traditional finance providers—such as banks—but who still loan money for many of the same opportunities as banks. Private lenders are generally not beholden to the same rules and regulations as banks. As such, private lenders are more flexible with regards to who they lend to, and the characteristics of the loans they provide.
Compared to a loan from a bank, financing from a private lender is generally:
- Faster to receive. (Weeks, not months.)
- Larger. (Flexibility in loan sizing)
- More creative. (Lenders can finance transactions traditional banks cannot, often due to regulatory reasons.)
- Shorter-term. (Usually 12-18 months, compared to decades-long mortgages.)
In short: Private lenders enjoy unique qualities that make them appealing to a set of borrowers who are not served well by traditional bank loans.
Question 2: Who borrows from a private lender?
Today, a wide variety of individuals and organizations borrow from private lenders—especially individuals and organizations who need funding for real estate investing. Sometimes, real estate investors need to borrow more than a bank will provide them. Often, real estate investors require a quick closing to secure their deal.
Dodd Frank is one large contributing factor to the increased popularity of private lending. Specifically, the host of new regulations Dodd Frank placed on real estate lending has made traditional bank financing for real estate harder, more time consuming, and more frustrating to acquire than before the Recession.
No matter the specific need, private lenders are able to serve individuals and companies who are looking for more creative and flexible loans than banks can give them.
Question 3: How can I get the most out of borrowing from a private lender?
Loans from private lenders are not the right financing vehicle for everyone, nor are they right financing option for every deal. They are usually short-term transactions and can be obtained quickly. The speed of private lender loans allows borrowers to take advantage of opportunities when they need a fast closing.
But to get the most out of your private loan, you first have to do your homework. You have to run the numbers, and ensure the loan makes sense for your situation, and the investment you’re looking to finance with it. Take your time. Approach your loan like you would any serious business deal. Most importantly, only partner with a lender who approaches your loan application with equal diligence.
Question 4: How do I find the right private lender for me?
Most of the advice available on finding a private lender is useful, but it’s not always entirely sufficient to help you find the right private lender for you.
Common advice will tell you to:
- Research potential lenders in your area.
- Read their websites to see who sounds legitimate.
- Make sure they have funded borrowers like you, and projects like yours, before.
- Talk to a member of their staff in-person.
These are good fundamentals. But we have some additional advice: Choose a responsible lender that is highly invested in the success of its borrowers.
At Evergreen Private Finance, we work hard to live this advice. We:
- Have an experienced team that can rapidly analyze transactions.
- Have a deep real estate background that allows us to understand our borrower’s perspective.
- Focus and fund transactions that enable our borrowers to win.
Whoever you choose to receive financing from, always ensure they are tangibly invested in your success—and not just their own.
If you are interested in partnering with us as your lender, please contact us at firstname.lastname@example.org, or call us at 202-713-9072.