Here are four questions to ask before choosing a private (hard) money lender:
- What is the lender’s reputation? The answer to this question is the most important. Does the lender do what they say they will do? Get referrals from other borrowers that can confirm the lender is trustworthy. Knowing the answer to this question can make the difference between a successful or unsuccessful transaction.
- What does the lender do in loan volume? The lender’s loan portfolio size often makes a difference in the quality of service they provide. The larger the lender, the more bureaucratic and burdensome their systems and processes are, which is the opposite of what a private lender is expected to be, i.e., Are you dealing with the decision-maker for loan approval? Does the lender prioritize the value of relationships when underwriting a loan, or is the red tape of rigid rules and checklists what the lender focuses on because they have to given their size.
- Where does the lender’s source of funds come from? A lender’s capital source will make a difference in how flexible and creative the lender can make underwriting decisions. Unfortunately, many private money lenders appear to be direct lenders when in reality, their source of funds is not their own. This can limit the lender’s flexibility in making quick decisions and may restrict the lender’s ability to modify or restructure the loan after the loan has been funded.
- Where is the lender’s primary geographical lending area? – The more extensive the geographical lending area, the more systems and processes the lender needs in place to maintain quality control. For example, if the lender is not located in the area you need a loan, they won’t intimately know the market and rely on third parties for due diligence, which slows down the process and makes it more costly. This then defeats the primary purpose of private money, which is speed and efficiency.
Knowing the answers to these questions will help shed light on which private money lender is the right fit for your specific transaction.
Fidelis Private Fund offers borrowers a flexible alternative to conventional lending institutions. We specialize in fast and creative short-term bridge financing with a clear exit strategy to transition properties and add value, so at loan maturity, the borrower is in a position to either sell or refinance.
We exist to help our clients achieve their financial goals. When private money lending is determined to be the right fit for the borrower, Fidelis Private Fund is a quality source to be considered.
However, if the borrower’s loan is not a fit for a private lender, we have the resources and connections to help find the right lender to fit the specific need.
Fidelis is the one-stop-shop to accomplish our borrowers’ goals. Call me at 702-379-3468 to see how Fidelis can help you.