Private Money - 5 DONT's and 5 DOs

Private Money - 5 DONT's and 5 DOs

Private Money - 5 DONT's and 5 DOs

Dear Alt-funding list member:

I would say that as much as 75% of our loans are initiated by third-party loan brokers.  We rely heavily on our wholesale broker relationships and dearly value the strong working relationships that we have.  As much as we love our relationships with brokers, it is an ongoing challenge to develop new relationships.

Perhaps the greatest challenge I find in working with loan professionals is that most have received their training in the institutional money realm.  As such, they often have difficulty adapting to the very different approach required for brokering private money loans.

I thought it might be worthwhile to lay out a few dos and donts as helpful guidelines for brokers adapting to the unfamiliar demands of private money lending.  So here you go.


(1)     Don’t Spin or tweak or hide information regarding the particulars of a loan.  That might work with banks, but it doesn’t go over well in the world of private money.  We are trying to get the whole picture in order to make a sensible decision on a loan.  If something doesn’t line up quite right, we will generally notice.  If there inconsistencies we will tend to shy away from the loan.

(2)     Don’t think that: private money is a good source for everything that the banks won’t do because private money parameters are more relaxed across the board.  It is not that simple.  Generally speaking, private money is more rigid when it comes to equity requirements and more relaxed, given sufficient equity, regarding other funding criteria.  (You’d be surprised at how many people come to me looking for a 100% CLTV second to top off a residential deal; this is not the type of thing private money was made for.)

(3)     Don’t submit individual tax returns with your files.  We almost always go stated income with individual borrowers.  (However, we do generally require company financials when an organization is involved.)

(4)     Don’t drop the ball.  Banks are like machines stamping out large volumes of loans.  In a sense they are indifferent.  Private money, on the other hand, is much more personal.  You work directly with a few people and those people get really involved and work hard on your file and are directly accountable to other people.  It is important to be vigilant with regard to your part in the loan process because effectively, you are part of a bigger team.

(5)     Don’t get discouraged easily.  Putting private money loans together is hard work, but if you take the time to learn how to do it, you will be rewarded.


(1)     Do submit a summary cover sheet with every file.
(2)     Do submit property and value information with every file.
(3)     Do quote all particulars to your borrower early in the transaction.  Some brokers seem to think that if they don’t mention all the fees and points, maybe a borrower won’t notice.  Borrowers always notice.  It is better to put all the facts out there right up front.  You will be doing yourself a favor.  After all, why work on a loan that never was going to happen.

(4)     Do take the time to learn about our loan programs, guidelines, process, and packaging guidelines.  You will find useful information on our web site.

(5)     Do feel free to utilize us as a source of education on private money.  That is how we view ourselves.  We will always have time to answer your questions and discuss your transactions.  We don’t care how much you know, as long as you are interested in learning and bring professional values to the table.

If you would like to discuss private money loans further or run a particular scenario by me, contact me via phone at 503-348-7011 (or 800-510-2120 out of area), or e-mail me at  Otherwise, if you would like to get a better feel for our company and the types of programs we do, please browse our web site at


S. Clay Sparkman

Vice President

Fairfield Financial Services, Inc



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