Introduction
Asking a private lender for money is a big step. Many borrowers rush in before they are ready, and they get a quick “no” or poor loan terms. The good news is that a little preparation can change that. When you know your project inside and out, you speak with confidence, and lenders notice.
Before you reach out, it helps to know what private money lenders look for before funding a deal. Then answer these 10 simple questions honestly.
The 10 Questions
1. How much money do I need?
Add up the purchase price, repairs, closing costs, and holding costs like taxes and insurance. Then add 10 to 15 percent extra for surprises. Asking for too little can leave you stuck halfway through the project.
2. What will the money be used for?
Lenders want a clear plan. Break your budget into simple parts like purchase, repairs, and permits. Show where every dollar goes, and back it up with a scope of work and contractor quotes.
3. How will I pay it back?
This is your exit plan. Will you sell, refinance, or rent out the property? Have a backup plan in case the first one fails. Lenders want to know exactly how and when they will get their money back.
4. Do the numbers work?
Use real numbers, not hopeful ones. If the deal only works in a perfect world, it is not ready yet. Know the after-repair value, your total costs, and your profit. Our guide to the 7 numbers every real estate investor must know can help.
5. How much of my own money am I putting in?
Lenders feel safer when you invest some of your own money. Even a small amount shows you are serious. It also lowers the lender’s risk, which can lead to better terms.
6. What experience do I have?
Share your past projects. If you are new, show the team supporting you, such as your contractor, agent, or mentor. A strong team can make up for a short track record.
7. What collateral can I offer?
Most private loans are backed by the property. Know its value and how much equity you have. More equity usually means less risk for the lender.
8. Is my paperwork ready?
Have these ready before you apply:
- Purchase contract
- Repair budget and scope of work
- Comparable sales
- Proof of funds
- Company (LLC) documents, if needed
9. What could go wrong?
Delays and extra costs happen. Show the lender you have a cash reserve and a plan to handle problems. Honest planning builds trust.
10. Is this the right lender?
Not every lender fits every deal. Some focus on flips, others on rentals or new builds. Look for one who funds your type of project in your area. Platforms like PML Connection let you browse lender profiles and start conversations directly.
Conclusion
Lenders say yes to borrowers who come prepared. Skipping these questions is one of the biggest mistakes borrowers make when seeking funding.
When you know your numbers, your exit plan, and your risks, you stop sounding like someone asking for a favor and start sounding like a business partner.
Write down your answers and keep them with your loan package. The clearer your plan, the faster you will find the right lender. Download the PML Connection app on Google Play or the App Store to start connecting today.