The private lending process remains mysterious to many investors, costing them deals and money.
Let's pull back the curtain on exactly what happens from that first phone call to money in your account.
Understanding this process is the difference between fumbling through deals and executing with confidence.
Day One: The Initial Conversation
Your first contact with a private lender isn't an interrogation—it's a partnership discussion.
Quality lenders want to understand your experience, your strategy, and your specific deal. They're evaluating fit as much as creditworthiness.
Come prepared with basics: purchase price, estimated renovation costs, after-repair value, and timeline. If you don't have all answers, that's fine.
Good lenders help you think through deals, not just process paperwork. They'll ask about contractor relationships, past projects, and backup plans. This isn't skepticism—it's expertise.
The best private lenders give initial feedback immediately. They'll tell you if your ARV seems high, your renovation budget looks light, or your timeline appears optimistic. This consultative approach separates relationship lenders from transaction processors.
Hours 2-24: The Documentation Dance
After verbal interest, documentation begins. Private lenders typically need: purchase agreement, renovation scope of work, comparable sales supporting ARV, contractor bids or estimates, your financial statement, entity documents, and proof of funds for down payment.
This seems like a lot, but organized investors have these ready. Create a standard package you can customize for each deal. The faster you provide complete documentation, the faster you get approval.
Here's insider knowledge: lenders focus on different things than banks. They care less about your tax returns from three years ago and more about your contractor's ability to deliver. They're not checking employment history; they're evaluating deal fundamentals.
The Underwriting Deep Dive
Private lenders underwrite differently than banks. While banks focus on borrower ability to repay, private lenders focus on deal profitability and exit strategy.
They're asking: "If this borrower disappears tomorrow, can we finish this project and recover our capital?"
They'll verify property value through their own channels—BPOs (broker price opinions), AVMs (automated valuation models), and local market knowledge.
They'll scrutinize your renovation plan, often having contractors review your scope of work. They're not doubting you; they're protecting both parties from unrealistic projections.
Smart lenders also evaluate market conditions. Is inventory trending up or down? Are similar properties selling quickly? What's happening with local employment? This context determines not just approval but terms.
The Approval and Terms Discussion
Approval isn't binary—it's a negotiation. A lender might approve your deal but suggest modifications: lower loan amount requiring more down, shorter term to reduce risk, higher rate for first-time borrowers, or release of funds in draws rather than upfront.
This is where relationship matters. Transactional lenders give take-it-or-leave-it terms. Relationship lenders work with you to structure deals that work. Maybe they'll accept additional collateral, or adjust terms based on bringing in a partner, or modify draw schedules to match your contractor's needs.
Understanding your approval helps future deals. Ask why specific terms were offered. What would improve terms next time? How can you become a preferred borrower? This feedback is gold for building your business.
Closing: The Final Sprint
Private lending closings are refreshingly simple compared to traditional mortgages. No waiting for appraisals, no last-minute underwriting conditions, no mysterious delays. Once terms are accepted, closing can happen in days.
You'll sign a note (your promise to pay), deed of trust (securing the property), and various disclosures. Title insurance protects everyone. Funds are typically wired directly to escrow.
The entire process might take an hour versus the marathon traditional closing.
But speed doesn't mean sloppiness.
Read everything.
Understand prepayment penalties, default provisions, and draw procedures. Ask about extension options if renovation takes longer. Clarify insurance requirements.
This is business, and details matter.
Post-Funding: The Ongoing Relationship
Funding isn't the end—it's the beginning. Good private lenders stay engaged throughout your project. They'll process draw requests quickly, provide guidance during challenges, and sometimes even connect you with resources like contractors or other professionals.
Communication is key. If problems arise (and they will), inform your lender immediately. They've seen everything and often have solutions.
Hiding problems only makes them worse. Lenders want you to succeed—foreclosure is their last resort, not first option.
Building Your Lending Relationship
Your first deal is your hardest.
By deal three, approval might take hours instead of days. By deal ten, you might get verbal approvals over coffee. This isn't favoritism—it's earned trust.
Every successful project builds credibility. Every transparent communication strengthens relationships.
At Capital Direct Funding, we've refined our process to be thorough yet fast, protective yet flexible.
We know that every hour counts in competitive markets, so we've eliminated unnecessary steps while maintaining smart underwriting.
Ready to experience private lending done right?
Contact Capital Direct Funding at (626) 796-1680 or visit capitaldf.com.
Let's walk through your next deal together, from application to funding and beyond.