In the last year-and-a-half, Sharestates has seized the opportunity to expand our offerings in the private lending space. We’ve already discussed correspondent lending and how we help leverage capital for our clients. Today, we’re going to discuss table funding.
First, what is table funding?
What Table Funding Is and How It Helps Lenders
Table funding is a leveraged lending strategy that helps smaller lenders present themselves as direct lenders even if they don’t have enough capital to cover some loans. It’s often referred to as “wholesale lending” or “white label lending”.
Essentially, table lending works like this: A borrower applies for a loan through Lender A. Lender A goes to Lender B and says, “I need a loan.” When the paperwork is prepared between Lender A and the borrower, Lender A appears to be the true lender, but the capital for the loan is provided by Lender B. Lender A assigns the loan to Lender B, who provided the capital. This type of lending is called table funding because the funds for the loan are provided at the table when the documents are being signed.
Another phrase often used in exchange for table funding is “wet funding.” The alternative is “dry funding”. However, not all states allow dry funding.
What’s the Difference Between Dry Funding and Wet Funding?
Wet funding refers to a process where the entirety of the funding transaction takes place at the same time when all the documents are signed.
For instance, Lender A and the borrower meet to sign the loan documents. Lender B’s presence isn’t necessary since they already have an agreement in place with Lender A that the loan will be assigned to Lender B upon closing. After the documents have been signed, the closing agent receives the wired funds from Lender B and disburses them to the borrower along with any fees associated with the transaction to the various parties.
With dry funding, no money exchanges hands at the closing. Instead, the lender providing the capital for the loan receives the paperwork, reviews it for signs of fraud, and approves the transaction. After that approval, the funds are disbursed. The process usually takes one to four days.
Table funding is not legal in every state. In fact, the following states are dry funding states. All other states allow for wet funding.
- New Mexico