Private Equity and Having Skin In The Game
Category : Blogs
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