Private lending is as old as religion, especially with shreds of evidence in the holy books. Even though the concept remains that there is a lender, a borrower, a loan amount known as the principal, and an interest to be repaid alongside the loan, lending dynamics have changed over time. In the past, private lending real estate investors were usually crowdfunded with funds from family and friends before their institutionalization.
Table funding is when one lender, usually a larger capital source, gives its balance sheet to another lender, usually a smaller third-party originator, to fund a loan. Limitations surround these forms of transactions in some states, such that licenses are required for the capital provider and the lender to operate.
When engaging a capital provider that provides table funding as a lender, there are many available alternatives, such as getting bank financing or just loan funding with cash. However, the best alternative that can be compared to table funding is for the lender to fund the loan and then sell it afterward to a capital provider in the secondary market. This is commonly called a loan or note buyer.
Table funding allows a lender to fund a loan with little to no cash and minimum overhead, technology, or infrastructure. Thus, in addition to providing strong brand and identity protection, sophisticated table funders also provide strong brand and identity protection. On the other hand, it may seem as though note selling is without its benefit; however, note buyers may have a lower cost of capital because they have significantly less infrastructure and support to provide a lender.
When choosing a funding option, a lender should evaluate their own needs and conditions, both legal and otherwise, to make the best decision. To learn more about the benefits of both note selling and table funding, click the link below:
About Note Servicing Center
Note Servicing Center provides professional, fully compliant loan servicing for private mortgage investors so they can avoid the aggravation of servicing their own loans and just relax and get paid.
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