Private Equity and Having Skin In The Game

Private Equity and Having Skin In The Game

Category : Blogs

   Mutual Assurances

private equity lenders

Private Equity Lenders (aka Hard Money Lenders) are different than traditional lenders in that their focus is on the collateral property, as opposed to you, the borrower. With a private equity loan the key component necessary to move the deal forward is the collateral property itself, by which I mean it’s income stream and/or value. This is because lenders look to the value of the property as their guarantee for payment. That being said, private money lenders feel  safe at low LTV (Loan-To-Value) ratio  for the same reason that borrowers do. A low LTV makes it a bad idea for the borrower to default but also a bad idea for the lender to take the property, thus mutual cooperation is rewarded. It’s a symbiotic system. It’s set up so that both parties are rewarded for doing what is in the interest of the other party.

Food For Thought,
Nathaniel S. Fulford

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