When the majority of people consider getting a loan, their first thought goes to which bank to choose. It’s the natural association; banks have been lending money for years. But on occasion, certain loans don’t fit bank criteria. The borrower ends up in a situation where they still require the loan, but are unable to secure funding through traditional means. This is a scenario we see regularly, and with increasing frequency following 2008 and the tightened lending landscape. But what are the benefits of using a private lender?
The Pros of Going Private
Borrowers can get denied loans for a variety of reasons when using traditional lenders. Too short of a time span is often cited as a reason for denial. A potential borrower could need the loan closed sooner than the bank is willing to offer it, and can’t wait for the bank to run through the entire process. With a private loan, the window is generally 10 days depending on appraisal time frames. This relatively short time frame, for a 1-3 year loan, helps borrowers get the money they need quickly.
Credit is also a stumbling block on occasion. Increasingly, loans are being given to only those with the highest credit scores. With the bubble burst in 2008, those involved in real estate took a hit across the board, and more often than not, those in construction or development saw the effects most drastically.
For Sterling Pacific specifically, we pride ourselves in our local and industry knowledge. Our years of experience in hospitality and real estate, as well as a team with a diverse background in the ins and outs of the real estate lending industry. Our focus on lending in Northern California affords us the ability to be knowledgeable about the areas we’re lending in, and better evaluate the potential loan. Being located where we lend also gives us the potential for more personal interactions, allowing us to better serve those that work with us.
The Cons
This isn’t to say that it’s all rosy when choosing a private money lender. The interest rates are generally higher than those found at banks. A 12 -36 month loan also isn’t ideal for a long term funding solution, but instead a short term alternative to fulfill more immediate needs.
We hope this paints a better picture of what it means to use a private lender, and why it can be a viable option. If you’re in the market for a potential loan, and considering Sterling Pacific, we encourage you to check out our (Borrower) page. If you’re a broker that has a potential deal in mind and would like to refer it to us, our (Industry Professionals) page is the place to go. Either way, we hope to hear from you soon.