UNDERSTANDING THE 4 C'S OF PRIVATE CAPITAL UNDERWRITING

When it comes to obtaining funding for a real estate property purchase, private lenders will typically consider four key factors: credit, cash flow, collateral, and capacity. These factors are often referred to as the "4 C's" of lending.

1. Credit: A private lender will want to see a good credit score and a solid credit history from the borrower. This will give them an indication of the borrower's ability to repay the loan.
2. Cash flow: The private lender will also want to see that the borrower has the ability to generate enough cash flow to repay the loan. This can include income from the property itself, as well as other sources of income.
3. Collateral: The property itself serves as collateral for the loan. A private lender will want to see that the property is in good condition and has the potential to appreciate in value.
4. Capacity: The private lender will also want to see that the borrower has the capacity to repay the loan. This includes the borrower's debt-to-income ratio and their overall financial situation.

When applying for a private loan, it's important for the borrower to have a clear understanding of these four factors and to be able to demonstrate to the lender that they meet these criteria. A good credit score, steady cash flow, a valuable property, and a strong financial situation will all increase the chances of the loan being approved.

It's also important to note that private lenders may have different lending criteria than traditional banks or other financial institutions. They may be more flexible and willing to consider factors that traditional lenders may not, such as the borrower's experience in real estate investing. However, borrowers should be prepared to pay a higher interest rate on a private loan compared to a traditional loan.

In conclusion, the 4 C's of lending, credit, cash flow, collateral and capacity, are important factors that private lenders will consider when deciding whether to fund a real estate property purchase. Borrowers should be prepared to demonstrate that they meet these criteria in order to increase their chances of getting approved for a loan.

Do you have a property in mind you're looking to obtain capital funding? Do not hesitate to get in touch with Juan at LendingOne to discuss your strategy and receive a quote on your upcoming deal. Please call or text directly at 561-231-8761 or email [email protected].