When it comes to real estate investing, how you fund a deal can shape everything—from your timeline to your returns. Choosing between a private lender, sometimes referred to as hard money lenders, and a bank isn’t just about the numbers—it’s about how much control you want over your deal. In this post, we’ll break down the key advantages and risks of each option, so you can align your financing with the way you invest.
The Importance of Financing in Real Estate Investment
Financing is what transforms real estate plans into real deals. Whether you go through a bank or a private lender shapes not just how much you can take on, but how quickly you can move — and in real estate, timing can make or break an opportunity.
Pros and Cons of Traditional Bank Loans
The big draw of a bank loan? Cost. Lower interest rates can translate to meaningful long-term savings, and longer repayment terms help smooth cash flow, especially for long-hold strategies or portfolios with multiple properties.
But the tradeoff is significant. Bank loans tend to move slowly, and their rigid income verification requirements can leave fast-moving investors at a standstill.
Many bank loan products are built around conventional properties, traditional borrower profiles, and straightforward deals, leaving little room for creative strategies or unique opportunities.
In short, traditional financing works best when stability matters more than speed. If your deal can wait and your financials check every box, the lower cost may be worth the extra time. But for investors chasing time-sensitive opportunities or working with unconventional assets, the inflexibility of a bank loan can be a serious limitation.
Exploring Private Lending
Pros and Cons of Private Lending
The biggest draw of private lending is speed. With minimal paperwork and a focus on the deal itself, investors can move fast—often closing before a bank would finish reviewing your credit report. These loans also come with more flexible terms, making them a strong match for strategies like fix-and-flips or short holds that don’t fit the mold of traditional financing.
The tradeoff is cost and timing. Private money usually comes with higher interest rates, and the loans tend to be short-term. That means you need a clear exit plan—whether it’s refinancing, selling, or paying it off quickly—because holding the loan too long can eat into your returns.
Private lending works best when the deal needs speed and flexibility more than low rates. If you’ve got a solid strategy and a tight timeline, it can be the edge that gets you across the finish line.
Comparative Analysis: Which is Better for Real Estate Investors?
Private lending gives investors something banks rarely do—room to move. Fast approvals and flexible terms make it easier to jump on deals without waiting weeks for underwriting. Whether it’s a short-term project or an unconventional property, private lenders can tailor financing to fit the strategy.
Traditional loans might save you money on interest, but they often shut the door on investors who don’t fit the mold. Private lenders focus on the asset, not your tax returns, which makes funding more accessible—even if your credit or income isn’t perfect.1 The higher cost can sting, but when timing matters, the speed and adaptability are often worth it.
Recent Trends in Real Estate Financing
Real estate financing is shifting—and private lenders are stepping into the spotlight. As major banks retreat from commercial lending in response to regulatory pressure and market uncertainty, private debt funds are accelerating their growth. Recent fund closings in the multibillion-dollar range underscore the increasing role of private capital in the real estate market, signaling a broader industry move toward alternative financing sources.
So what’s the right move for investors? It depends on your goals and your timeline. Traditional loans offer lower rates and long-term stability—but only if you can clear the qualification hurdles. Private lending, on the other hand, brings speed and flexibility to the table, making it a powerful tool when time is tight or deals fall outside the box.
In today’s market, the smartest financing choice is the one that aligns with your strategy—not just your balance sheet. Whether you go the traditional route or tap into private capital, knowing how each option works gives you the leverage to move faster, build smarter, and invest with confidence.
Looking for financing that moves at the speed of real estate? Conventus offers flexible, fast funding solutions built for modern investors. Connect with our team to learn how we can support your next deal!
Sources
- Gorius, Mike, and Kevin Hart. “Real-Estate Investors Explain Why They’re Willing to Pay Nearly Double in Interest to Work with Private Money Lenders.” Business Insider, 7 Mar. 2025, https://www.businessinsider.com/real-estate-investors-explain-why-use-private-money-lenders-interest-2025-3. Accessed April 4, 2025.
- Gorius and Hart. “Real-Estate Investors Explain Why They’re Willing to Pay Nearly Double in Interest to Work with Private Money Lenders.”
