Of course if the seller had no debt he could obtain all the loans himself and have the same cash out without selling the business and without having a basically unsecured note for his “equity”.  

He talks all about the unsecured debt.

It is because it basically is unleveraged by the asset (the ADU) financed (it is leveraged by the existing property). 

They need a license.The type of license varies as to the types of loans being made by a business, home loans, commercial loans, loans on chattel contracts, loans secured or unsecured.

There is a world of difference between $50k cash flow unleveraged and $50k cash flow from a highly leverage property.  

Also RE lenders rarely have unsecured personal loans like NEVER.. they do RE not consumer loans.

Then part of your loan leaves the property and becomes an unsecured creditor.  2- It would have to be a very small fund to be able to find attractive loans in a limited geographical area.  

This does not necessarily mean they will not sell, but if it is in BK it would need to be approved by the trustee, and depending on the type of BK they filed and the size of the unsecured creditors the trustee would only allow it to sell to the public to get the best price because - they have to make sure they get what they can for unsecured creditors AND the trustee is paid based on what is sells for, so they will want it to sell for more.

An unsecured loan, as this one seems to be, would not be eligible as a source of funds for someone doing conventional financing. 

We had an 8 figure LOC to buy distressed assets and sub 2  half of it completely unsecured so check book.