Real estate developers, property rehabilitation professionals, and landlords all have one thing in common. At some point, they’re going to need outside funding for a project. For many such real estate professionals, a bank is not an option.
The biggest problem with banks for real estate investors is that many banks won’t fund their project. Banks typically have stringent loan application requirements. If you get approved for a loan, you’ll end up in a 20- or 30-year mortgage contract. That means you’ll be tethered to the bank for a long time. Marketplace lending, however, offers a reasonable alternative that won’t keep your assets tied up long-term or keep you tied to a creditor for very long.
Why The Marketplace Lending Option is Attractive
Marketplace lending offers several benefits that real estate investors can’t get at a bank. Here are a few to consider:
- You borrow from a pool of financiers – With marketplace lending, you aren’t tied to one lender for a long period of time. Marketplace lending platforms like Sharestates take money from a pool of investors who believe in your project and want you to succeed.
- No long-term agreement – Marketplace loans also tend to be short-term, bridge financing solutions. You can fund a project on a six or twelve month amortization schedule, which allows you to pursue other projects and secure more funding for those projects while you complete your project and pay back your loan.
- Fewer hoops to jump through – Not all marketplace lending platforms require a credit check. Those that do don’t rely entirely on your FICO score to approve your loan. If you can guarantee your funding by proving you have the means to pay it back should your project go south, a marketplace lending platform is likely to give you the nod before a bank will.
- You can fund more than one project at a time – Banks are very concerned about borrowers’ leverage in the marketplace. While marketplace lenders care about that too, if you can prove you have the means to offer returns on the investment for your backers, you have a better chance at getting the funding you need from a marketplace lender.
- You can access your funds more quickly – The loan processing time at a bank is very slow. It could be weeks before you get your hands on the money you need to complete a project. With marketplace lending, once approved, your funding arrives quickly. That means you can turn your property around quicker, pay back your loan, and fund another project.
- You can finance smaller projects – Another benefit to going through a marketplace lender is you can secure funding for a small project. Many banks have minimum loan limits. If you want to fund a project below that limit, they won’t approve your loan.
- Marketplace lending is more flexible – Many marketplace lending platforms don’t just provide loans. If it makes more sense to structure your real estate project as an equity offer, then you can offer investors a return on their investment without taking out a loan that you have to pay back. Banks don’t offer that option, and if you find one that does, it will cost you to set it up.
Marketplace lending is a great option for real estate developers and other investors who appreciate quick funding at fair prices that won’t lock you into long-term contracts. Consider your options before you decide on a funding source, and make sure to due your due diligence on the lender and their underwriting criteria.