Private lenders and borrowers in the market for a private loan experience challenge when it comes to finding and connecting with each other.
Challenges for Lenders in Finding Borrowers
One of the most important things for private lenders is being able to vet quality leads, and borrowers strive to find and select the right lenders to fund their projects.
The majority of private lenders have a system for generating leads. The challenge is to find quality leads. When a potential borrower fills out a loan request form, the deal may appear to be a good one, but a lender won't know for sure if it is a true quality lead until they dig deeper. Some lead sources are good at screening loan requests, but others are unfiltered and can waste time.
Another major challenge for lenders is competition. As the lender works hard to close a loan, the borrower could be in the process of shopping around for offers from other lenders. That is why it is crucial for lenders to develop personal relationships with their clients. Providing excellent customer service is essential. And while word-of-mouth advertising is the best source of new business, lenders cannot ignore their online presence.
Private lenders should always be asking for reviews/testimonials, stay in touch with their network, and talk about some of the deals they have funded. Even after a private lender has generated a lead, the borrower or broker will still likely do some research on all the lenders they have reached out to. If the online presence of a private lender is lacking, all that money they spent on generating the lead could be squandered.
Challenges for Borrowers in Finding Lenders
Receiving quotes from multiple lenders is easy. However, there are several other factors to consider besides loan terms, including:
- Is the lender reputable?
- Can they close on time?
- How long have they been in private lending?
- Do they require a formal appraisal?
- Do they offer extensions?
- Do they lend from their own balance sheet?
Some of this information is not easy to figure out in advance. The question of lending from their own balance sheet can be complicated. Many lenders have multiple capital sources. A lot of lenders manage a fund and have full control of the money to be lent out. Other lenders fund with their own money and sell the loan shortly after closing. Some lenders have a correspondent relationship with a larger lender for certain loan types. Some lenders syndicate their loans to individual investors.
The following four strategies can help borrowers find the right lender:
- Ask for recommendations. Borrowers should talk to their peers in the industry and ask which lenders they have worked with.
- Hire a broker. Borrowers can save a lot of time and hassle by working with a broker who already has relationships with private lenders.
- Attend industry events. Local REI club meetings are a great place to talk to other investors and ask for recommendations. Lenders also attend these small local events. There are a few companies and associations that host live events focused on private lending, where you can meet tons of direct lenders, including the American Association of Private Lenders (AAPL), Geraci Media, Pitbull Conference, National Private Lenders Association (NPLA), California Mortgage Association (CMA), Private Lender Expo, and National Lending Experts (NLE).
- Online search. It is easy to find private lending companies using an online search, but there is much more to research. See if they have any reviews, view their social media profiles and feeds, read articles they may have published, and check to see if they are a member of a trade association.
Private Lending Lead-Generation Resources
Here are some websites and other resources that can connect borrowers with lenders.
This is one of the most popular resources for residential real estate investors to network and learn. They have a hard money lender directory that gets a lot of traffic.
- For Borrowers/Brokers: View multiple lenders, chat with them in forums, read reviews, and ask other investors for recommendations.
- For Lenders: Pay a membership fee to be listed, pay extra for more exposure, participate in forums, and post funded deals.
This is one of the highest-trafficked and largest lender directories. It has a great user interface and simple lender profiles.
- For Borrowers/Brokers: Search to view lender profiles, read reviews, and make contact directly. You can also request to get matched with multiple lenders.
- For Lenders: Pay a one-time fee to be listed, pay for premium placement, and pay per lead. You may already be listed and not know it.
This is a newer website that primarily matches borrowers/brokers with lenders using a few basic details, but it also has a directory of most of the lenders in the industry. The design and layout are very clean and simple.
- For Borrower/Brokers: Enter a few details about the loan and get matched with lenders.
- For Lenders: Purchase leads with a credit system.
In this directory website, the lender profiles provide an enormous amount of details about each lender’s guidelines, but only a small number of lenders show up in searches.
- For Borrower/Brokers: Browse lender’s profiles, make contact directly, and ask for recommendations.
- For Lenders: Create a detailed profile and pay a monthly advertising fee to show up in searches.
Operated by Connected Investors, this platform may have the largest database of private lenders in the country.
- For Borrowers/Brokers: Search to view basic lender profiles or submit basic details to get matched with lenders.
- For Lenders: Pay per lead and pay for premium placement.
One of the most popular resources for mortgage brokers to discover lenders. It is mainly a print publication, but the website does offer a searchable directory.
- For Brokers: Read the monthly magazine to see lender advertisements. Use the website to search by filtering, and contact each lender directly.
- For Lenders: Pay a monthly fee for advertising.
The Rules of Thumb blog from MoneyThumb hopes this post will help you as a private lender or a borrower to find each other. We would appreciate it if you would share this post on your social media page.