PRIVATE LENDERS AND HARD MONEY LENDERS ARE NOT THE SAME. PERIOD!

[Elvin Ames]

I've borrowed over 10 Million dollars from Private Lenders over the past 14 years of investing in real estate. Private Lenders and Hardmoney Lenders are like night and day. A private lender does not need to initial know you either. My first private lender was a guy who was mentioned in a book I was reading on real estate investing. I looked him up online because he had a unique name and called his house. I simply asked his wife if he was a private lender she said yes and she would have him call me when he got home. We met in his office a few days later and I met him and his partner. I have been borrowing money from them for over 14 years now (No resume, No checking of credit, No bank statement check, No background check, No Tax return check, No financial statement) JUST SHOW US THE DEAL!!!!! Always at 100% of the purchase and a 100% of construction. These guys where real estate investors them selves, but now ran construction companies, print shops, etc. They also had family funds in the mix as well. Though the total cost and loan is always below 75% of the ARV. When tough times came in 2008 they stood with me. They lent when all other forms of financing dried up. The HardMoney guys were no were to be found!!!

[Bill Gulley]

Again, "private lender" comes out of SEC and financial regulations, they are defined to be excluded from SEC and financial regulations. Requirement of a private lender is 1. they are related to you, blood or marriage, or 2. you personally know the lender and have past business dealings. or 3. you have been introduced to the lender who has past dealings with a business partner of yours. These are basic personal relationships that must exist, hence "private business transactions".

The private lender must also use his own money, not borrowed funds unless the loan is secured by his assets, he refis a building, loans you his equity. He may not use funds from other investors. 

The private lender may NOT be in the business of lending!!!!!

 A private lender may NOT advertise or offer funding to the public!!!!!

The amount of income generated from lending as well as the number of loans made can place a private lender in a category of being in the business of lending, by Tax Code taking them out of the private status.

Many, hard money lenders us the phrase "private lender" it's marketing hype and some are simply trying to fly under the radar. The fact that they lend "their money" isn't meeting the above qualifications as a private lender. 

So, that guy hanging around in REI meetings or on the internet is seeking a lending opportunity, he is NOT a private lender but a hard money lender and may then be subject to financial regulations!

Anyone who is lending through a business entity, where the majority of income for that entity is generated by lending activities is NOT a private money lender, they are "in the business of" lending.

So, if you see someone soliciting loans calling themselves a private lender, a red flag should be going up, that red flag simply means to stop and do some due diligence before you make a borrowing decision. It is not a deal killer for a borrower really, any compliance issue is on the lender's side. If a lender is not compliant, that might make it harder for them to collect and secure collateral as an unlawful lender, that's not a problem for a borrower.

Regardless, there are those willing to lend with a wide range of qualification and underwriting requirements, what any lender requires or is willing to loan on doesn't classify that lender in mortgage lending. 

Lots of unregulated good old boy hip pocket lenders out there, so take caution with predatory lending practices!

I'll say too, my opinion of HMLs has changed over the years, they all aren't loan sharks (but many are) and there is a real lending niche they serve, especially for flippers. 

Good luck :)