04 Jan 6 Private Lending Industry Facts You Need to Know
If you’re on the search for some financing, you need to know where to start. To begin, it helps to know about all of the options you have at your disposal. Having a thorough and accurate understanding of the private lending industry can be essential to your financial well-being. That’s because there are numerous advantages that private loans can provide over public ones. For more details about what those advantages are, continue reading below.
What is a Private Lender?
A private lender is an institution that provides funding outside of the traditional channels. These traditional channels can be credit card companies, mortgage lenders and traditional banks. Those are referred to by the federal government as public institutions. Any group, individual or company outside of that framework constitutes a private lender. While public lenders use criteria like your credit score to make lending decisions, private lenders offer asset-backed loans. Asset-backed loans are loans that are secured by an agreed-upon asset. The lender can then seize said asset if the loan term isn’t paid back on time.
The Requirements for Obtaining a Loan Through the Private Lending Industry Are Different
Setting out to obtain the financing you need can be daunting for many reasons. But typically the possibility of being denied is what makes most people nervous about starting the process. Starting the process of seeking a loan one of the biggest concerns people have relates to their credit history. Although credit history and current financial standing are important there are other important factors as well. So don’t be scared as these are not the sole determining factors for getting the funding you need.
Keep in mind that there are other requirements for getting a loan through a private lending industry. These include financial statements, purchase sales agreements, and profit/loss statements just to name a few. Since that’s the case, the likelihood of being turned away isn’t as high as it is with public lenders. This makes the private lending industry ideal for investors seeking funds even if they don’t have a picture-perfect credit history.
You Can Get a Private Industry Loan for A Variety of Reasons
If you’re feeling relieved after finding out that the requirements for obtaining private loans aren’t as rigid as the ones for obtaining a public loan, you likely aren’t alone. But before you get too excited, you should know about the reasons why private loans are typically granted. The private lending industry could be a viable alternative for you if you fall into one of several different categories. Here are some of the circumstances that could make you the ideal applicant for a private industry loan:
- Fix-and-Flip Real Estate investments
- Vacant Properties
- Chapter 11 Filing
- Real Estate Renovation
- New Construction
If your situation falls under any of the above scenarios, you should make an appointment with the experts at Nelson Funding to find out about the loan options available to you soon!
The Private Loan Industry is Regulated Differently
Because the private loan industry doesn’t heavily scrutinize credit history like public lenders, some rules are different. Private lenders have to abide by a different set of regulations. These regulations are set in place by the federal government to prevent borrowers from taking on too much debt.
Once they reach a certain amount, a banking license is mandatory. With that in mind, it’s important to make sure that the lender you’re working with knows the lending laws. It’s good to keep in mind every state has different lending laws as well.
The Private Loan Industry Offers Custom Loan Agreements
One of the downfalls of public loans are that the term agreements may not always be favorable to borrowers. Fortunately, private lenders are capable of providing custom loan agreements to cater to your specific circumstance. Let’s say for instance you need to obtain a new property that you’ve had your eye on. But you want to repay it faster than what your public lender will allow you to. A private lender is capable of providing you with the terms you’re hoping for. Private lenders tend to be more flexible than public loans.
The fact that so many private lenders are often willing to build loan agreements catered to the needs of borrowers. This is why private loans are such an effective alternative to public loans. This ability dramatically increases the likelihood of obtaining the funding you need. Without the private lending industry, getting funding on terms that work for you may be nearly impossible.
Private Lenders Provide Funds Quickly
Another common challenge that people encounter when seeking funding is not receiving the cash they need in a timely fashion. One of the reasons why borrowers tend to receive their funds faster than with private loans is because they can process loans faster than public lenders can. In most cases, private lenders can provide you with the funding in just the matter of days. When it comes to public loans on the other hand, they could take several weeks to provide you with the funding you need.
Private lenders are most likely the best option for anyone seeking funds in a crunch. This is because of how fast these lenders are able to provide you with the funds. If you go through a public loan providers, plan on a lengthy funding process. This is usually because public lenders have a long application process. But with private lenders, the process isn’t as long. This is the biggest reason why private lenders are able to provide funds quickly.
Your Financial History Is Less Important in the Private Lending Industry
The timing of when funding is available isn’t the only issue that borrowers have when attempting to receive funding. Another obstacle you must overcome if you’re seeking a loan without picture perfect credit is your financial history. If you don’t have an ideal credit background, the odds of obtaining a loan with a public lender are slim. But thanks to the private lending industry, people who don’t have the best financial background can still obtain the funding they need.
Instead of your financial history, private lenders use the viability of the project you’re using the loan to fund to determine whether or not they’ll approve it. Since that’s the case, obtaining funding with a private lender is likely to be a more realistic option for getting a loan if you don’t have great credit. That’s why coming to a private lender with a well thought out business plan for how you see yourself using the loan is a must. Additionally this helps provide peace of mind that you’ll be able to pay the loan back within the agreed upon terms.
Get the Private Industry Loan You Need From Nelson Lending
If you’re on the search for funding for a new project you’ve been eager to start, now’s the time to begin exploring your options within the private lending industry. Finding a reliable loan provider is likely easier than you think, too. To learn more about the benefits of receiving funding from a private lender, get in touch with the private lending industry veterans at Nelson Funding.
The staff available at Nelson Funding is more than happy to help answer any of the questions you might have about securing a private loan. Whether it’s a multifamily, hospitality or a bridge loan, Nelson Funding is more than happy to help you take the necessary steps to getting your project off the ground. To find out what it takes to get the funding you’ve been searching for, get in touch with the friendly and knowledgeable team at Nelson Funding today!