Private Money Solutions: Flexible Capital for Complex Deals

Unlock opportunity with private capital for value-add projects, time-sensitive acquisitions, and complex development deals.

Beyond the Bank: Unlocking Opportunity with Private Capital

In the world of commercial real estate, the most lucrative opportunities often fall outside the rigid lending criteria of traditional banks. Value-add projects, time-sensitive acquisitions, and complex development deals require a capital partner that values speed, flexibility, and creative problem-solving. This is the domain of private money—a diverse and dynamic source of capital from non-institutional lenders like high-net-worth individuals, family offices, and specialized debt funds.

Unlike conventional lenders who focus on historical cash flow and extensive documentation, private lenders are asset-based, focusing on the intrinsic value of the property and the viability of your business plan. They underwrite the opportunity, not just the paperwork. This fundamental difference allows them to structure custom-tailored loans and close transactions in a fraction of the time required by a bank, providing a decisive advantage in a competitive market.

This guide explores the world of private money solutions, from short-term bridge loans to sophisticated equity partnerships, and demonstrates how leveraging a network of private capital providers can unlock deals that banks simply cannot fund.

When to Leverage Private Money Financing

Private money is not a replacement for bank financing; it is a strategic tool for specific scenarios where its unique advantages are paramount. Developers and investors turn to private capital when they encounter one of the following situations:

• Value-Add and Repositioning Projects: This is the quintessential use case for private money. Acquiring a property with significant vacancy, deferred maintenance, or in need of a complete renovation requires capital that banks, who lend on existing cash flow, are unable to provide. Private lenders fund these deals based on the future "as-stabilized" value, providing the funds for both acquisition and renovation.
• Time-Sensitive Acquisitions: When a compelling opportunity arises that requires a closing in 10-20 days, a traditional 60-90 day bank loan process is a non-starter. Private lenders can underwrite and fund deals with incredible speed, allowing investors to secure properties ahead of slower-moving competition.
• Land Acquisition and Development: Traditional lenders are often hesitant to finance raw land or the initial "horizontal" development of a site (infrastructure, utilities, etc.). Private lenders who understand the development lifecycle can provide the capital to acquire and entitle land, bridging the gap until a traditional construction loan is viable.
• Complex or Non-Conforming Deals: Properties that don't fit a standard mold—such as mixed-use projects, special-use facilities, or buildings in transitional neighborhoods—are often rejected by conventional lenders. Private lenders have the flexibility to underwrite unique assets based on their specific merits.
• Borrower Circumstances: An experienced investor with a stellar track record might have a temporary credit issue or a complex financial situation that disqualifies them from a bank loan. Private lenders can look past these issues if the deal itself is strong and the sponsor is credible.

A Spectrum of Private Capital Solutions

Private money is not a single product but a range of flexible financing tools that can be customized to fit the deal. Our network provides access to the full spectrum of private capital.

Private Bridge Loans

The workhorse of value-add real estate, a bridge loan provides short-term financing to "bridge" a property from its current unstabilized state to a point where it qualifies for permanent financing or can be sold.

• How it Works: These loans typically have terms of 1 to 3 years with interest-only payments to maximize cash flow during the renovation and lease-up period. Lenders often fund a percentage of the total project cost (Loan-to-Cost), including both the purchase price and the renovation budget.
• Best For: Acquiring and renovating properties, leasing up vacant space, or simply closing on a property faster than a bank can perform.

Mezzanine Debt & Preferred Equity

For larger projects, senior debt from a bank or other lender may only cover 60-70% of the total cost. Mezzanine debt or preferred equity is a form of subordinate financing that fills the gap in the "capital stack" between the senior loan and the sponsor's cash equity.

• How it Works: This layer of capital allows developers to secure higher leverage than a senior lender alone will provide. In exchange for taking on more risk, these private capital providers earn a higher return, often a combination of current interest and a share of the project's profits.
• Best For: Large-scale development or acquisition projects where the sponsor wants to maximize leverage and minimize their cash contribution.

Joint Venture (JV) Equity

In a joint venture, a private capital partner acts as more than a lender; they become an equity partner in the deal. This is the ideal structure for proven developers who have a great project but are short on the required cash equity.

• How it Works: The private JV partner can provide up to 90-100% of the required equity for the project. In return, they receive a significant share of the profits (the "promote") after all costs are paid and initial capital is returned.
• Best For: Experienced developers with a fully entitled, "shovel-ready" project who need a capital partner to complete the deal.

The Private Lender's Mindset: Underwriting for Opportunity

Private lenders evaluate deals through a different lens than traditional banks. Their underwriting is less about historical financial statements and more about the future potential of the asset and the sponsor's ability to realize it.

The three most important factors for a private lender are:

1. The Deal Itself: Is the property in a good location with strong market demand? Is the business plan credible? What will the property be worth once the value-add plan is complete?
2. The Sponsor's Experience: Does the borrower have a proven track record of successfully executing similar projects? Private lenders are betting on the jockey as much as the horse.
3. The Exit Strategy: How will the short-term loan be repaid? A successful application must present a clear and realistic plan for either selling the stabilized property or refinancing into a long-term, permanent loan.

The Clear House Advantage: Your Guide to the Private Lending Market

The private lending world is fragmented and opaque. Finding theright capital partner—one who understands your asset class, deal size, and business plan—can be challenging and time-consuming. size, and business plan—can be challenging and time-consuming. This is where Clear House Lending provides an unparalleled advantage.

• Curated Access: Our network of over 1,800 lenders includes a deep roster of vetted private capital providers, from regional hard money funds to national debt platforms and family offices. We know who is actively lending and on what terms.
• Competitive Leverage: By presenting your deal to a curated group of qualified lenders, we create a competitive environment that forces them to offer their most aggressive terms, saving you time and money.
• Structuring Expertise: We are experts in structuring complex deals. We know how to build a compelling loan package that speaks the language of private lenders, highlighting the opportunity and mitigating perceived risks to ensure the highest probability of a swift approval.

Frequently Asked Questions (FAQs)

1. What is the difference between private money and hard money?

The terms are often used interchangeably, but there can be a distinction. "Hard money" typically refers to purely asset-based, short-term loans at higher interest rates, often for distressed situations. "Private money" is a broader term that includes hard money but also encompasses more flexible, creative, and sometimes lower-cost solutions like preferred equity or JV partnerships from sources like family offices.

2. What are typical rates and terms for a private money loan?

For a private bridge or hard money loan, interest rates typically range from 10% to 15%, often with interest-only payments. Loan terms are short, usually 12 to 36 months, designed to cover the acquisition and stabilization period.

3. How much of my own cash ("skin in the game") will I need?

Private lenders typically want to see the sponsor contribute 25% to 40% of the total project cost in equity. However, this can come from cash, equity in the land if you already own it, or other creative structures. For highly experienced developers, JV partnerships can sometimes reduce the cash requirement to 10% or even less.

4. How quickly can a private money loan close?

Speed is the primary advantage. While a bank loan can take months, a private money loan can often be approved and funded in as little as 5 to 10 business days, assuming a complete package and a straightforward deal.

5. Are private money loans "non-recourse"?

It varies. While some private lenders offer non-recourse options (meaning they can only seize the property in a default), many loans, especially for smaller projects or less experienced sponsors, will require a personal guarantee (full recourse).

6. Why use Clear House Lending instead of trying to find a private lender myself?

Finding the right private lender is like finding a needle in a haystack. Our extensive, vetted network gives you immediate access to dozens of capital sources who compete for your business. This saves you the time of shopping your deal around, protects your credibility, and creates the leverage needed to secure the best possible terms the market can offer.