Private Money Lenders – Who Are They And Where Can They Be Found?
If you’re looking for private money lenders because you want to get money for a business project or to make a real estate deal then you’re looking for a particular type lender.
Private Money Lenders – Who Are They?
Private Money Lenders
We know for starters that a private money lender is not a bank. These people are private individuals who have money to lend for various enterprises and expect to get a healthy rate of return. The broadest definition of a private money lender includes anyone or group who has money to lend and is willing to make a loan.
What’s important here is that a private money lender would not be looking for an interest in your business or project. They just want to get a higher rate of interest on their money than they can get from a bank.
Private Money Lenders – Definition
A private money lender is any individual who lends money to a business or person for use in that business or for a specific project. There are specific types of private money lenders which are called hard money lenders. These people want some solid asset as collateral for the money they lend. That collateral is usually real estate.
The goal of a private lender is to get the highest rate of return on their money over time. The time period may be as short as a few weeks, or in some cases even as short as a few hours (this is called flash funding), or may last for a few years. These private lenders charge an interest rate that is much higher than a bank loan because the risk they are taking is much higher. Also, they usually don’t want their money tied up for a long period of time. The long term private lending is done as private mortgages for real estate.
What Does A Private Money lender Want?
Private money lenders in general do not want an interest in your business or project. They are only interested in getting interest on the money they lend. They are only making a loan and not taking an ownership interest. Thus there is a significant difference between a private money lender and a private money investor.
If their loan is made to a corporation they would receive either a note or bonds as evidence of their loan. This all depends upon the length of time the money is lent. And a private lender only gains control over the corporation when the lender isn’t paid back. Then the private lender could make a claim on the corporation’s assets to get paid before any stockholder gets anything. In addition, the private money lender could force the corporation into bankruptcy to get paid.
The only major exception in private lending is with hard money lending. There the loan is made with an asset as security just like a mortgage loan.
What Do You Have To Give Up?
Except in the case of a hard money loan, you don’t have to give anything away to a private money lender. Unlike a private money investor, the private money lender has no say in your operation unless you fail to pay as agreed.
All you have to figure out in getting a private loan is whether your expected profits are enough to may the payments on the loan as well as maintain and grow your business. The payment terms in a private loan can be anything that you and the lender agree to. So it would be possible to get a private money loan and not make any payments until the entire balance is due.
Private Money Lenders – Where Are They?
Private lenders are anywhere people are found. As in the case of private money investors you only have to recognize them. They are the same type of people who have excess money, more than they can reasonably use for the necessities of life. And they want to put that money to work.
Private money lenders could be professional people like doctors, lawyers, successful business people, and many other occupations where they make a lot of money. These people could be all around you just looking for a better interest rate than they can get at a bank on a savings account or certificate of deposit (CD). These people may also be people who have a substantial IRA or other retirement fund and want to make a higher rate of interest to grow their nest egg faster.
So, if you know any of these people you might approach them and ask whether they would be interested in making a loan for your business or project. If you don’t ask you’ll never know, and best of all you might get a yes answer.
But in addition, there are private money lenders who are looking for projects. Many who advertise on this web site are in this category. They want to put their money in something that gives a greater rate of return than just a bank.
See which ones give you the best interest rate for your business or project. Private lending is also competitive, so you may be able to get a good deal. But one thing you can expect is that private lending will be much more expensive than a bank loan. So, if you can qualify for a bank loan that may be a better option.
And remember these private money lenders are really interested in loaning money, if not to you then to someone else.
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