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How Does a Private Money Lender Evaluate My Loan?
- Jacqueline OShaughnessy
- 5 days ago
- 4 min read
By Jacqueline O'Shaughnessy, Loan Officer / Private Capital, NMLS #382900 — South Wind Financial, Inc, NMLS #9462 — Las Vegas, NV
Private Money Explained – Part 2
One of the biggest misconceptions I've seen over nearly 30 years in private lending is that borrowers think private lenders are simply looking at credit scores. In reality, the strongest loans tell a complete story. When I review a loan, I'm looking at the property, the equity, the exit strategy, and whether the numbers make sense for everyone involved. My job isn't just to approve loans—it's to help structure them for success.
Who This Guide Is For
You're looking for financing on an investment property, bridge loan, construction project, or unique real estate opportunity.
You've spoken with a private lender, and they're asking questions about the property, your experience, your exit strategy, and your financials.
You may be wondering:
"Why are they asking all of this? I thought private lenders only cared about the property."
The truth is, private lenders evaluate the entire transaction—not just one piece of it.
The Problem
Maria found a great fix-and-flip opportunity.
She expected the lender to focus only on her credit score.
Instead, she was asked:
How much are you purchasing the property for?
What is it worth today?
What will it be worth after repairs?
How much cash are you bringing in?
What's your exit strategy?
She left the meeting wondering,
"Are they lending to me, or are they lending on the property?"
The answer was both.
The Doubts
Borrowers often ask:
What matters most to a private lender?
Is my credit score the biggest factor?
Does experience matter?
Why do lenders ask about my exit strategy?
What happens if I've never completed an investment project before?
Understanding how lenders think can help you prepare a stronger loan request.
A Private Lender Looks at the Entire Picture
Unlike traditional banks, private lenders often take a broader view of the transaction.
They aren't looking at just one number.
They're evaluating whether the loan makes sense from beginning to end.
Think of it as putting together pieces of a puzzle.
The stronger each piece is, the stronger the overall loan.
Five Things Every Private Lender Evaluates
1. The Property
The property is the collateral for the loan.
Lenders want to understand:
Current market value
Property condition
Location
Marketability
Type of property
After Repair Value (ARV), if renovations are planned
A strong property helps reduce overall risk.
2. Equity and Loan-to-Value (LTV)
One of the first calculations many private lenders make is the Loan-to-Value ratio.
The more equity in a transaction, the greater the financial cushion if market conditions change.
Lower LTV generally means lower risk.
3. Your Exit Strategy
One of the most important questions you'll hear is:
"How will this loan be paid off?"
Private money is typically short-term financing.
Lenders want to understand your plan.
Common exit strategies include:
Selling the property
Refinancing into conventional financing
Long-term rental financing
Business proceeds
Other available assets
A clear exit strategy gives lenders confidence that the loan has a realistic path to repayment.
4. Your Experience
If you've completed similar projects before, lenders often want to know about them.
If you're a first-time investor, that doesn't necessarily mean the answer is "no."
It simply means the lender may spend more time understanding your team, your contractors, your budget, and your overall plan.
Preparation often matters just as much as experience.
5. You
Private lenders also want to know about the borrower.
They may review:
Credit history
Financial strength
Available cash reserves
Investment experience
Communication
Organization
Overall professionalism
Private lending is built on relationships.
Lenders want confidence that you'll communicate honestly and manage the project responsibly.
The Solution
Many borrowers spend all their time worrying about their credit score.
Experienced investors spend their time preparing a complete loan package.
The strongest loan requests clearly explain:
The property
The opportunity
The numbers
The exit strategy
The timeline
When lenders understand the entire story, they're in a much better position to evaluate the opportunity.
Frequently Asked Questions
Is my credit score the most important factor?
Not always. While credit may be considered, private lenders often evaluate the entire transaction, including the property, available equity, exit strategy, and overall strength of the deal.
What is an exit strategy?
An exit strategy is your plan for repaying the loan, such as selling the property, refinancing into long-term financing, or using another source of funds.
Can first-time investors qualify?
Yes. While experience can strengthen an application, many first-time investors obtain private financing when they present a well-prepared project and a realistic plan.
Do private lenders care more about the property or the borrower?
Both matter. The property provides security for the loan, while the borrower demonstrates the ability to execute the plan and repay the loan.
Private Money Terms
Collateral: The real estate securing the loan.
Loan-to-Value (LTV): The percentage of the property's value being financed.
After Repair Value (ARV): The estimated value of a property after planned renovations have been completed.
Exit Strategy: The planned method for repaying a short-term private loan.
Key Takeaways
Private lenders evaluate the entire transaction—not just your credit score.
The property's value, available equity, and marketability are important factors.
A clear exit strategy is one of the most critical parts of a loan request.
Preparation, organization, and communication can strengthen your application.
Understanding how lenders think helps you present a stronger investment opportunity.
Every private money loan tells a story.
The better your story is organized, the easier it is for a lender to evaluate your opportunity.
If you're considering private financing, I'd be happy to review your deal, discuss your investment goals, and explain how lenders evaluate transactions. Together, we can determine the financing structure that best supports your project.
Schedule a complimentary consultation today and let's discuss your investment opportunity.
All my best
Jacqueline O'ShaughnessyLoan Officer/Private Capital
South Wind Financial, Inc
6655 W. Sahara Ave., suite D114
Las Vegas, NV 89148
702-429-3994 cell
702-543-7535 eFax
Company NMLS #9462
Agent # 382900
Agent license #6603
CA-DFP1382900
AZ 1032777
FL L0101736
Makes sense! I think with any loan, it pays to be prepared to present all the important information you think you'll need, and then some, to give you that full picture!! Great info here.
I recommend her services