Andre Agassi once famously said, “Image is everything.”
While image may not be everything, it counts for a good deal, and hasn’t always been kind to direct private lending.
How can the industry change those optics to be seen not as a last-resort outlier but a vital part of the financing ecosystem from the start of a project?
“Private lenders can provide a vital role in commercial real estate development projects,” said Kevin Wolfer, president and CEO of Kennedy Funding Financial. “That is something we are very proud of in our business.”
Time is money, Wolfer said. Using private lending as a first resource can save both in the long run, even though interest rates are higher than traditional lending.
While traditional lenders such as banks can take as long as six months to approve financing for a project, direct private lending is much quicker. Kennedy Funding Financial, for example, can close a loan in as little as five days.
“Instead of spending weeks trying to get traditional loans, coming to a direct private lender right away means more deals go through faster, opportunities aren’t missed, and job opportunities are created for workers and businesses,” he added.
A new administration in Washington means eyes will be on development. This is an opportunity for direct private lenders to showcase how they work as part of a successful overall business strategy for developers looking to grow in the Donald Trump era.
The funding from direct private lenders can be used to buy land, or pay a developer’s operating costs during construction.
Obtaining funding from a direct private lender also provides developers with flexibility they may not be able to get from a traditional lender.
- Loans are short-term, usually three to five years.
- Direct private lenders can customize funding plans.
- The loans are centered around collateral rather than simply the borrower’s credit history.
- Many lenders, including Kennedy Funding Financial, don’t penalize borrowers for paying off their loans early.
- Direct private lenders can offer up to 70 percent loan to value ratio.
“The support we provide isn’t about competition with traditional lenders,” Wolfer said. “Often, our funding supplements what they provide, allowing a project to go forward faster. That means jobs, economic development, and growing the tax base in communities.”