Structure of private lending

[Eric P.]

How does the structure of private lending work exactly? Is it money from friends, family, and everyday average Joe investors? Is it simply just an I.O.U. and keeping track yourself of who you owe money or does it still require to undergo written contract agreement? If I still require a mortgage even after receiving some funds form private lending, wouldn't it raise a red flag to the bank where I got the money from when showing proof of assets?