The Ascendance of the Debt Fund
In recent years, the landscape of commercial real estate financing has undergone a significant transformation with the rise of debt fund lending. Debt funds have emerged as a robust alternative, providing flexibility, speed, and customized solutions that are reshaping the dynamics of the industry.
The Changing Face of Financing
Commercial real estate projects have historically heavily relied on banks and insurance companies to secure financing. The financial crisis of 2008 led to tighter lending standards, making it challenging at times for even well-qualified borrowers to access loans. This adjustment created a void that debt funds swiftly filled by offering quicker and more tailored financing options.
Critical Advantages of Private Money Lending
- Flexibility: Debt funds can offer flexibility that banks and insurance companies often struggle to match. Borrowers with unique project requirements or credit histories that fall outside the conventional norms can find more receptive partners in debt funds.
- Speed: The lengthy approval processes of traditional lenders can cause delays that may hinder real estate projects. Debt funds are known for their streamlined procedures, enabling borrowers to secure funds within weeks or even days instead of months.
- Customized Solutions: Debt funds assess each deal individually, allowing them to create customized financing solutions that address the specific needs of a project. This approach fosters creativity and collaboration between borrowers and lenders.
- Less Stringent Requirements: Debt Funds often prioritize the value of the property being financed over the borrower’s financial strength, making it possible for investors with valuable assets to access funding that might be otherwise out of reach.
While debt funds offer many benefits, it’s also important to acknowledge potential challenges. The interest rates and fees associated with debt funds can be higher than those offered by banks and insurance companies, reflecting the increased risk undertaken by those lenders. Additionally, borrowers should conduct thorough due diligence on potential lenders to ensure credibility and legitimacy.
Bridger Fund is a commercial real estate mortgage fund providing accredited investors with an avenue to invest in a diversified pool of real estate loans collateralized by real estate in California. The fund is managed in a joint venture between Slatt Capital and Doug Watson and specializes in short-term bridge financing for commercial real estate investments.
Bridger Funds’ investment strategy focuses on the small loan sector in California, creating a more diversified and conservative pool than many of our competitors. Bridger Fund tends to see more loan opportunities than its competitors due to its relationship with Slatt Capital’s origination machine. Consequently, Bridger Fund can be more conservative in its loan selection process while giving its investors significant yields.