The Benefits of Using
G
a Private Lender
etting started as a new
real estate investor or
to bring your existing
business to the next
level of success will
generally require investment capital.
More and more investors are taking
advantage of using private lenders to
achieve their business goals. The ad-
vantages of using a private lender over
conventional lenders or hard money
lenders can be summarized as follows:
• You may be able to agree to terms
more suitable to you.
• You may be able to finance 100%
of the project plus expenses (many tra-
ditional banks and lenders will require
I do get some push-back
from people when I suggest
that they approach family and
friends for investment capi-
tal because some feel uneasy
asking them for money and the
possible implications if things
don’t work out exactly to plan. Just keep
this in mind, you are asking them to
participate in a business opportunity, not
a hand out. Furthermore, many of these
people are already taking some form of
investment risk; so why not in you?
you to have some “skin in the game”).
• Less underwriting scrutiny of you
and the particular project.
• Quicker response.
• Avoid the oversight that many
lenders are now putting in place
during the life cycle of the project.
• Private lenders may not require
you to have any documented experi-
ence.
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Finding Your
Private Lenders
Once you have
decided that using
a private lender
is the right and
perhaps the only
possible direction
for you to take,
it is now time
to explore your
opportunities of
locating people
who may be inter-
ested in funding
your projects. Generally, a great place
to start looking is among your personal
and business circle of influ-
ence. This may include the
following:
• Family
• Friends
• Co-workers
• Acquaintances
• Local real estate groups
Keep it Legal and Get it
Down on Paper
Just because using a private lender
may be a simpler and less formal pro-
PAGE 46 • 2016
By Carl Schiovone
cess than what you would
typically experience
with either a hard money
lender or conventional
lender, this does not
mean you will forgo all
of the required docu-
ments and due diligence
that will protect both you
and your private lenders.
Make sure to discuss the
terms and conditions of
the private loan with your
attorney and have them
prepare all of the necessary documents.
It is always advisable to encourage your
lender to also have their attorney review
the documents.
Positioning Yourself as a
Solid Borrower
Even if you personally know the
people who will be providing the capital
to fund your project, this does not take
you off the hook from properly prepar-
ing yourself as a reputable borrower.
There are some characteristics that your
lenders will be expecting from you and
include the following:
Knowledge of the Business
Even as a new investor, it will be
critical for you to have the basic skill set
in order to effectively analyze opportu-
nities that may come your way. In the
excitement of the hunt for your project,
you will need to know when it is time to
move forward or pass on an opportunity.
In fact, as part of your discussions
with your lender, you should illus-
trate why the project is a solid deal by
sharing the assumptions and results you
have made. In addition, you should >
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