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What is private cash used for?
Private cash is generally used as a bridge: a way to get from point A to point B. It is generally a short to medium term solution (1-6 years), and there is

nearly always an exit strategy going in. It is used for all types of property secured financing: commercial retail, restaurants, hotels/motels, marinas,

elder care facilities, industrial, agricultural, raw land, land development, construction, rehab, multi-family, single family homes, manufactured homes, and floating homes.

What are the interest rates?
Private cash rates generally range from 10 to 15%. The rate is determined by looking at a combination of factors: (a) LTV ratio, (b) strength of borrower,

(c) condition/desirability of property, (d) actual cash-in or real equity contributed by borrower. Typically our rates fall in the 12-13% range. A list of

our cash advance guidelines may be found here.

What fees are involved?
Private lenders charge a cash advance fee generally equal to 5% of the gross amount of the cash advance. We also charge a doc prep fee ($500 or more, depending on the size

of the cash advance), a property inspection fee ($500 or more, depending on the location of the property), and a collection account setup fee which is based on the

size of the cash advance. There are no hidden junk fees.

Can the fees be paid from the proceeds of the cash advance?
Yes, if there is enough equity in the project. This is frequently the case.

Is there a pre-payment penalty?
Generally there is a 3-6 month minimum interest clause for our cash advances. With a 3 month minimum interest clause, for instance, it means that if a borrower

repays a cash advance in 3 months or more, there is no penalty. If the borrower repays the cash advance, for example in 2 months, then the borrower will have to pay an extra

month's interest out of escrow at closing.

Why would anyone pay those kinds of rates and fees for a cash advance?
There are many reasons whey a borrower would choose to use private cash over a cheaper institutional option. For example, professional property investors

like to use private cash when buying because they are able to make offers which are not constrained by long timelines and numerous rigid conditions. Often

times speed is a very significant factor in completing a profitable transaction and in those cases it often makes sense to pay for a short-term private cash

option rather than loose the deal. Frequently the condition of a property won't allow for the initial financing with conventional cash, and in those cases

private cash may be used. Often the type of property is a factor: banks don't like lending on raw land and lots, but private cash lenders are more inclined

to do so. Cash leverage is another factor. Fairfield Financial, for example, cash advances based on the true value of a property, not the purchase price, so

sometimes we lend 100% of the total acquisition cost for a property. The structure of the deal may be a factor. Most private cash lenders allow the buyer to

establish their equity through the mechanism of a seller carry back; banks won't do this. The list goes on and on.

What is the most common use for private cash?
Most common cash advances are probably construction, rehab, and land development cash advances. We have an entire FAQ devoted to these cash advances: see the Rehab and Construction

cash advance FAQ.

How fast can private cash cash advances close?
In a matter of one or two days, but more typically, you should figure on 1-2 weeks. (Keep in mind that it is only possible for the lender to move quickly if

the borrower, broker and other third parties are moving quickly as well.)

Is an appraisal required?
Some private cash lenders require them. Evidence of value is a critical part of the private cash cash advance process. However, it is in my opinion that a good set

of comps is just as effective in establishing value as a good appraisal. Many of our borrowers are professional investors, and i feel that they are qualified

to perform the value analysis. This allows us to streamline the process. However, it is important to note that putting together a god set of comps is hard

work.

As a mainstream mortgage broker, I don't see much of this type of thing. Why should I be interested in private cash?
To be perfectly frank, it is my belief that mainstream mortgage brokers are being squeezed out of the industry. Lenders are ramping up their operations to

better provide online cash advance sourcing directly to borrowers. We saw a similar thing in the travel industry over the past years. The travel agents that have

survived, and even thrived, are the ones who effectively established niches within the industry. It is my belief that the same will be true for mortgage

brokers. Plain vanilla cash advances can be easily processed in an assembly line fashion which easily translates to the world of the novice and a web browser. Niche

lending, on the other hand, tends to be a hand-crafting of sorts, and cannot be easily automated. Look at private cash. There are no absolute rules. Many

factors must be considered in making a decision and frequently those factors are intangible. Ultimately a high degree of thought work and common sense is

involved. Private cash will always be a individuals process. So if you tell me, "I am not interested in private cash because I don't do unusual cash advances," I say to

you, "You might want to reconsider."

As a mortgage broker bringing A transaction, how do they get paid?
It is simple. The broker brings the lender a borrower. The lender prices the cash advance to them. (Think of yourself as a wholesale buyer.) You price the cash advance to

your client, adding your fees as appropriate. You stay involved in the cash advance (or not) as you choose, and prior to closing, you submit a fee demand to escrow

and receive a check directly from the title company.

There are basically four steps.

First, run the concept by them. You may call and discuss the cash advance with them, or you may e-mail a summary, or you may use our online cash advance submission engine,

which will walk you through the process. If they like the project concept and feel that the numbers are acceptable, they proceed to the next step.
They review a complete cash advance packet. They ask that this be sent via overnight mail or delivered to the office (fax copy is not acceptable).
If all this checks out, They ask the borrower for a deposit (generally $500). This should be in the form of a cashier's check or cash order. They provide a

conditional cash advance commitment letter at this time.

If the property checks out, They draw up the documents and close the cash advance through escrow.

Is the deposit check refundable?
If they close the cash advance through escrow, the deposit is applied as a credit to the cash advance fees. If they don't close the cash advance because (a) the borrower does not or

cannot perform or (b) the project upon inspection is "significantly" different than as represented, They keep the deposit to reimburse us for our costs.

Otherwise, if they fails to perform for any reason, they return the deposit to the borrower.

What needs to be included in a private cash cash advance package?

Written by Jeff Chaney an experienced private cash originator from Manhattan Beach, CA that lends nationwide. He can be reached at 800-572-4080