While the private lending industry has been around for nearly a century, over the past two decades it has just begun to show its true potential. Following the 2008 financial crisis, traditional mortgage financing companies (banks and credit unions) have had their hands tied by new regulations, like the Dodd-Frank Act.
These regulations have heightened governmental and institutional oversight and led to more stringent loan application processes. The increased bureaucracy and red tape throughout traditional lending markets have slowed approval times and made it nearly impossible for real estate investors to get approved for business loans. Luckily over the last 20 years, private lenders, with the help of capital backers, have entered the lending arena in force to fill the gaps and give savvy investors opportunities to grow in the real estate landscape.
In short, for independent brokers, the time to grow within the private lending market is now!
Below, we’ll explain why private lending has become the go-to option for today’s real estate investors and explore the four stages of capital sourcing, from sole broker to corporate firm. Then, we’ll explain how private lenders can transition to more scalable funding structures with the help of capital providers.
These regulations have heightened governmental and institutional oversight and led to more stringent loan application processes. The increased bureaucracy and red tape throughout traditional lending markets have slowed approval times and made it nearly impossible for real estate investors to get approved for business loans. Luckily over the last 20 years, private lenders, with the help of capital backers, have entered the lending arena in force to fill the gaps and give savvy investors opportunities to grow in the real estate landscape.
In short, for independent brokers, the time to grow within the private lending market is now!
Below, we’ll explain why private lending has become the go-to option for today’s real estate investors and explore the four stages of capital sourcing, from sole broker to corporate firm. Then, we’ll explain how private lenders can transition to more scalable funding structures with the help of capital providers.
How Private Lending Works: An Asset-Based Approach
Why has the private lending industry taken off over the last two decades? For starters, private lenders operate outside of governmental and institutional oversight, enabling them to offer streamlined loan application processes. And, as you can imagine, private mortgage lender regulations are much more flexible and investor-friendly–unlike traditional lenders who focus heavily on credit scores and income.
Rather than focusing on the individual, private lenders take an asset-based approach to their approval processes. By focusing solely on the investment and considering things like a property’s Loan-to-Value (LTV), Loan-to-Cost (LTC), and After-Repair-Value (ARV), private lenders have more avenues to say “yes” to investors regardless of credit scores or downpayments.
Rather than focusing on the individual, private lenders take an asset-based approach to their approval processes. By focusing solely on the investment and considering things like a property’s Loan-to-Value (LTV), Loan-to-Cost (LTC), and After-Repair-Value (ARV), private lenders have more avenues to say “yes” to investors regardless of credit scores or downpayments.
Metric | Description |
LTV | Compares loan amount to property’s current market value |
LTC | Compares loan amount to the estimated total project costs. |
ARV | Projects the value of the property post-renovation. |
Less bureaucracy and an asset-based approach to real estate investment lending empowers private lending companies to provide investors with:
- Flexible terms;
- Fast approval processes;
- More control and property investment options;
- No prepayment penalties;
- And, eligibility for bad credit borrowers with little to no downpayment.
The speed, agility, and accessibility private lenders offer real investors through business purpose loans, like fix and flip financing and rental loans, sets them apart from traditional lenders as the premiere lending option throughout the real estate investment market.
The 4 Stages of Capital Sourcing
Customer support should go beyond automation and chatbots. A capital partner should have a knowledgeable and readily available team working behind the scenes to help:
- Streamline loan origination including underwriting, closing, funding, and servicing.
- Provide insights and guidance into key decision-making processes.
- Increase your business operations capacity.
While the private lending industry is ripe with opportunity, growing a successful private lending company requires sacrifice, investment and time, regardless of which stage of capital sourcing you are in.
The 4 Stages of Capital Sourcing
- Sole Broker: You’ve decided to venture out independently, with no loan processing solution.
- Sole Broker + Processor: When your successes have enabled you to team up with a loan processor.
- Boutique Firm: You’ve built a team of multiple brokers with one or more loan processors.
- Corporate Firm: You now have at least 11+ brokers in your firm and are expanding.
From sole broker to corporate firm, growth and expansion hinges on financing, structure, and industry knowledge. However, rarely does growth and greater deals come without a combination of capital sources getting involved. That is why scaling brokerage firms turn to capital providers to gain the tools, resources, and guidance to achieve growth in today’s lucrative private lending industry.
Table-Funding: White-Label Funding for Growing Private Lenders
The private lending industry was once dominated by entrepreneurs raising capital in unstructured, highly risky ways that entailed little to no checks and balances–such as approaching friends and family or personal and religious networks. That was until 2014, when institutional capital providers, like Roc Capital, entered the market.
Recognizing the true potential of the private lending market, Roc Capital brought structure, discipline, and the benefits of institutional capital sourcing to the heavily unregulated private sector through table-funding programs.
Recognizing the true potential of the private lending market, Roc Capital brought structure, discipline, and the benefits of institutional capital sourcing to the heavily unregulated private sector through table-funding programs.
White-Label Table Funding
Table funding, or wet funding, is when one lender uses another lender’s capital to fund a loan at closing. Private lenders who fund real estate investment projects–like new builds and fix and flips–leverage table funding lender programs to access more capital and greater business opportunities.
Best of all, white-label table funding lenders, like Roc Capital, remain anonymous throughout the loan process, handling all underwriting, loan processing, and funding behind the scenes–enabling private lenders to maintain authority and professionalism with their investment partners.
Best of all, white-label table funding lenders, like Roc Capital, remain anonymous throughout the loan process, handling all underwriting, loan processing, and funding behind the scenes–enabling private lenders to maintain authority and professionalism with their investment partners.
Roc Capital’s White-Label Table Funding Example
- The borrower (real estate investor) applies for a loan for an investment property with a private lender (TPO). The TPO represents itself as the capital lender to the borrower.
- The TPO “brings the loan” (i.e., identifies the investment property and borrower) to the table-funding lender (Roc Capital).
- Behind the scenes, Roc Capital does the loan underwriting, including overseeing and drafting all loan documents. If the deal meets the lending standards, Roc Capital funds th
- Roc Capital wires the money directly to the borrower at the “closing table.” Hence the name table-funding! The TPO is not required to contribute any money toward the closing on the property.
With white-label table funding programs through an institutional capital sourcing partner, private lending companies are able to remain balance-sheet-lite to take on more investment clients and opportunities. Even better, with capital providers like Roc Capital handling the entirety of the loan process (wire transfers, loan servicing, accounting, construction draw approvals and releases), private lenders can allocate more time and resources to their clients–building stronger relationships through enhanced customer service.
The Bottom Line for Private Lenders
If you’re looking to unlock untapped potential and exponential growth in today’s lucrative private lending industry, table funding programs, like Roc Capital’s White Label Table Funding, provides the resources and structure to win more clients and scale your business.
We provide the industry’s most reliable funding programs with the flexibility to meet your investor clients’ unique investment needs, including:
We provide the industry’s most reliable funding programs with the flexibility to meet your investor clients’ unique investment needs, including:
- Fix and Flip Loans
- Ground Up Financing
- Stabilized Bridge Loans
- Single Property Rental and Rental Portfolio Loan Options
Ready to make a bigger mark in the private lending industry and grow your brokerage firm? CLICK HERE to learn more and speak with a Roc Capital Relationship Manager today.
