Private lending for commercial real estate investors is a trendy topic, especially with traditional banks tightening their purse strings due to recent bank failures and the Fed raising interest rates.
Many builders, developers, commercial real estate investors, entrepreneurs, and business/property owners are turning to private lenders for fast, flexible access to the capital they need to acquire and develop property. The problem is myths and misconceptions can make it difficult for borrowers to consider working with a private lender.
Let’s take a look at some of those myths and misconceptions and explore the truth:
Myth #1: Private Lending Is Only for People Who Can’t Get Traditional Financing
This is not true. Commercial real estate (CRE) loans through private lenders are a viable option for any CRE investor. Private lenders are typically more interested in the value of the financed property, the underlying financial fundamentals, and the likelihood the borrower will complete the intended project rather than the borrower’s credit score.
Myth #2: Private Lending Is Only for Experienced Investors
While it is true that some private lenders prefer to work with more experienced investors, there are plenty of private lenders willing to work with new or inexperienced investors. Private lending can be a great way for new investors to get started in commercial real estate investing. It allows them to secure financing without jumping through the many hoops required by traditional lenders, such as banks.
Myth #3: Private Lending Is Too Expensive
While it is true that private lending typically comes with higher interest rates and associated fees than traditional financing, that’s because private lenders like Enact Partners are typically easier, faster, and more flexible to work with for CRE investors than banks. This costs a premium. Additionally, private lenders often fund deals that traditional lenders would not consider, such as properties needing significant repairs or renovations. All things considered, for short-term loans (the only kind of loans Enact Partners does) the overall cost is generally not that much more compared to longer-term loans through a bank.
Myth #4: Private Lenders Are Sharks Looking to Take Advantage of Investors
We can only speak for ourselves, of course, but the notion that private lenders are predatory, looking to take advantage of real estate investors, is false. Just as there are with traditional banks and Wall Street lenders, there may be some unscrupulous private lenders. Enact Partners is not one of them. Sure, we’re looking to make a profit like any other company, but we do so in partnership with our clients. In fact, we come from a real estate investment and development background ourselves, so we understand the challenges of financing commercial real estate deals.
Myth #5: Private Lenders Are Difficult to Find
Finally, one of the biggest myths surrounding private lending is that private lenders are difficult to find. While finding the right private lender for your situation may take some effort, borrowers have options. Enact Partners understands this and that’s why we work hard to differentiate ourselves from other private lenders.
As a private lender, Enact Partners provides financing solutions often not available through traditional banks. We are not regulated by the Federal Reserve, so our process is easier and faster, with a lot less hassle. We know there are times when borrowers need to close quickly to seize an opportunity or avoid paying taxes.
We structure loans to meet the unique needs of our clients, not ours—and we are willing to explore opportunities with vacant commercial buildings, movie theaters, vacant land, and other special uses (even horizontal improvements).
Working with Enact Partners, borrowers benefit from having a single point of contact and direct communication with the 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.
Is Private Lending Right for You?
Private lenders provide valuable access to loans for commercial real estate investors, offering quick access to capital and more flexible loan terms than traditional lenders. As with any business decision, however, CRE investors need to do their research and due diligence to find the right lender for them.
Enact Partners is happy to answer questions about these and other myths and misconceptions surrounding private lending. We even have a page of frequently asked questions on our website you might find helpful. Our goal is to be a valued partner in helping our clients make informed decisions about their financing options and achieve success in commercial real estate investments.
Contact Us About Your Borrowing Needs
(760) 516-7776 | [email protected] | www.enactpartners.com
