Guide to Private Lending for Commercial Real Estate Investors

Commercial real estate investments are a great way to build wealth. When it comes to investing in real estate for business purposes, though, one of the biggest challenges is securing the financing needed to purchase properties, make improvements, or complete projects. This is where private lenders like Enact Partners add value.

Guide to Private Lending for Commercial Real Estate Investors

What is a Private Lender?

A private lender is an individual or an organization that provides short-term loans to borrowers, usually for a higher interest rate than traditional financial institutions, such as banks. Private lenders may be individuals, groups of individuals, or companies that specialize in lending money.

Private lenders typically offer loans to borrowers who need funds quickly or have unique circumstances that require greater flexibility than traditional lending institutions can provide. These loans are often used for real estate investments or business ventures.

Private lenders operate with fewer regulations than banks, which can make it easier and quicker for borrowers to obtain a loan through them.

What Makes Enact Partners Different?

Enact Partners is a private real estate lender based in Carlsbad, California. Enact Partners provides real estate investors, property owners, developers, and builders with fast, streamlined access to the capital they need to advance their real estate projects.

Unlike traditional banks and large private lending institutions, Enact Partners is a “Main Street” lender, not a Wall Street lender. Our rates are not directly affected by the Fed’s interest rate hikes, and we do not stop lending due to macroeconomic trends, like banks and Wall Street-backed institutional private lenders sometimes do.

Working with Enact Partners, borrowers benefit from having a single point of contact and direct communication with the lending decision maker, which provides transparency throughout the entire loan process. Additionally, Enact Partners is known for its creativity, flexibility, and knowledge of real estate development.

Why Consider Private Loans for Commercial Real Estate?

Private loans are attractive to real estate investors, property owners, developers, and builders for a number of reasons:

  • Easier to Qualify:Traditional lenders often have strict qualification requirements or general lending guidelines that don’t take into consideration the individual merits of borrowers and their projects. This can make loan approval difficult, especially in times when interest rates are high and the economy is iffy. In comparison, private lenders tend to focus more on the potential profitability of a project.
  • Faster Approval: Traditional lenders can take weeks, months, or even longer to approve a loan. Because they are not regulated by the Federal Reserve, the process with private lenders like Enact Partners is easier and faster, with a lot less hassle. Loans are often approved within days or a weeks, allowing real estate investors to move quickly on opportunities.
  • Flexibility: Private lenders offer greater flexibility than banks. Given the right circumstances, they are often willing to explore opportunities with vacant commercial buildings, movie theaters, vacant land, and other special uses—even horizontal improvements. Even if borrowers don’t qualify for conventional financing due to previous foreclosure, bankruptcy, inability to substantiate income, or inadequate liquidity, private lenders can often find a way.
  • Asset-Based: Private loans are usually asset-based, meaning the lender is primarily interested in the property’s value as collateral. This can make it smoother for borrowers to get approval. Enact Partners relies on the borrower and whether the project has solid fundamentals to inform its lending decisions.

What to Look for in a Private Lender?

Evaluating private lenders is important to ensure they’re a good fit for your real estate investment borrowing needs. Below are a few points to consider.

  • Experience: Look for lenders with expertise in the type of real estate investing you’re interested in. For example, Enact Partners’ extensive background in real estate development—coupled with our can-do attitude—allows us to offer fast, flexible, no-nonsense access to capital for horizontal and vertical improvements, property purchases, fix-and-flips, real-estate-backed investment opportunities, and more.
  • Fees and Interest Rates: Interest rates and associated fees are typically higher with private lenders. However, working with Enact Partners is easier, faster, and more flexible for borrowers compared to working with banks, which costs a premium. So, for a short-term loan (the only kind Enact Partners does) the overall cost is generally not that much different than a longer-term loan through a bank.
  • Loan Terms: Be aware that private loans for CRE are not meant to be long-term solutions. They act as short-term loans, usually 12 to 36 months in length. Their role is to provide borrowers with quick access to the capital they need to purchase land, fund renovations, and make other improvements while they seek long-term financing.
  • Communication: Look for lenders who are responsive and easy to communicate with. Enact Partners doesn’t like surprises and we know our clients don’t either. We believe the best way to achieve objectives is through open communication and clarity. We keep clients informed and engaged every step of the way, from application to approval to closing . . . and beyond.

How to Apply for a Private Loan for Commercial Real Estate Investing

Enact Partners makes it easy to apply for a CRE loan. We do business primarily in the western United States, including California, Oregon, Washington, Wyoming, Idaho, Montana, Arizona, Utah, Colorado, New Mexico, and Texas. Most of our loans range in size from $500,000 to $10,000,000.

We do short-term loans for land, horizontal construction, vertical construction, acquisition, bridge, and business purposes. This typically includes single-family land, single-family residences, multi-family land, multi-family residences, commercial land, office, retail, industrial, hospitality, short-term vacation rentals, and agricultural land.

Here’s a quick look at some of the information we need to get started:

  • Property basics such as the address, parcel number, type, and purchase price.
  • The loan type you are requesting, amount, desired length of loan, and when it needs to close.
  • The property’s current mortgage situation (if any).
  • A description of the property, its use, your plans for it, and total expected cost of your project.

Enact Partners can move and close as quickly as the borrower provides the needed paperwork and the appraiser completes the assessment. Generally, we see the process take from 7 to 45 days. If an appraisal is needed, the appraisal timeline often will dictate the closing date.

Let’s Work Together

Private loans can be a great opportunity for real estate investors who need funding quickly or for business purposes that traditional banks are averse to (such as horizontal improvements). Rest assured, Enact Partners will be with you every step from loan application through completion of the project, and hopefully on to your next one.

Contact Us About Your Borrowing Needs

(760) 516-7776 | [email protected] | www.enactpartners.com

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