Reasons to Choose Private Equity Lenders for Financing

Reasons to Choose Private Equity Lenders for Financing
January 26 08:35 2019 Print This Article

Private equity lenders are analternative investment class that has capital that is not listed on a public exchange. Private equity is funds and investors that invest directly in a private company. There are a lot of advantages that exist when you choose private equity for financing.

Stronger Offers: When you have private lender funds, you are able to make a stronger offer that has quicker closings. This can help eliminate financing contingencies with offers that are just as good as cash. Usually, the strongest offers are accepted butare not always the highest offer price. If you are able to close faster, then time is money and your offer looks stronger compared to some other offers.

Timely and Uncomplicated Approvals: Since private lenders don’t use traditional underwriting when qualifying buyers, they are able to do it faster than traditional loans. If you don’t have a high credit score, this may be a good option for getting approval because they don’t rely as heavily on things like a FICO credit score or debt coverage ratio. While these factors do play a role and are still important, they aren’t as necessary with private equity lenders.

Smaller Deposits: When you are going with a traditional loan, you are going to be required to put a certain amount down. Usually, for a commercial loan, you need 30% down. However, with private money lenders, you may only be required to put down 10% of the total cost.

Dealing with the Same Person: You will deal with the same individual throughout the life of the loan. These lenders will typically not have a 3rd party serving firm and, even if they do have one, they aren’t likely to sell the note. This means you can continue to deal with the present lender.

Avoid Prepayment Penalties: Many private lenders have short-term notes that can range from 12 to 24 months and there are no prepayment penalties. Many real estate investors prefer short-term loans since this allows them to get multiple loans from the same lender so they can keep flipping properties. Many conventional lenders don’t want you to use this strategy to flip properties because they count on interest for the long term. Therefore, they will penalize you for paying early because they are not getting the interest they are counting on.

Easier to Get When Self-Employed: When you go through a traditional lender, you have to provide a number of documents that help prove you have the ability to repay the loan. This can be difficult if you are self-employed. Since private money lenders are less stringent when it comes to underwriting, this makes it easier to get a loan for those who are self-employed.

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Clare Louise
Clare Louise

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