FEATURE
The Rise of Private Capital Lenders and Why It Matters for Real Estate Investing By Ryan Roberts, Sr. Director of Marketing
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hings have changed dramatically since the crisis of 2008. Spurred by a collapse of the housing market, the most financially tumultuous time in recent history drove large-scale, well-known banks to pull the e-brake on real estate lending. While the jury is still out, there’s no denying that the crash of the late-2000s was exacerbated by banks handing out mortgages to risky borrowers who, frankly, couldn’t afford them.
So, suffice to say that, even to this day, those latter-mentioned banks are still quite hesitant to give out speculative loans. It’s like selling the same jug of milk within the same financial bounding box. You either fit within the parameters of that box or not. However, it’s this exact hole in the market that’s allowed Private Lenders to enjoy a massive second wind of popularity.
20 Originate Report | May 2019
Lending From Non-Bank Intermediaries
Private lending has turned the tables on the traditional banking industry’s foremost product: Loans. Ten years since our nation’s most recent economic downfall, investors, from all industries and niches, having poured literally billions into companies and business that have been deemed by “Big Banks” to be too trivial or volatile to lend against. Well, it’s turning out that this is an incredibly lucrative, healthy, growing market. Money flowing in is feeding the ten-year-long trend of private lending. In fact, it’s valued at $500 billion, according to figures recently published by Bloomberg. The numbers are only growing, quarter after quarter; by 2020, it’s estimated that private lending could top $1 trillion. Much of which is within a completely unregulated financial market.
Tech-savvy Entrepreneurs are jumping on the proverbial train to, quite literally, capitalize on this boom, all while making it easier for small-scale borrowers to find applicable lenders. Jordan Selleck, for example, created DebtMaven, which is like a financial Tinder of sorts, is matching borrowers with lenders. These types of tools are yet to exist at scale in the real estate investment sphere. Now after just two years, almost 500 lenders are signed up on the platform, ready to match with a growing amount of Private Lenders on the hunt for lending opportunities. “They’re hooked on deal flow and willing to pay,” Selleck told Bloomberg in regards to his lenders. “It’s grown at a crazy pace.” It’s not the same type of lending were used to, but a great analogy of the overall market trend.
