Private Money is a commonly used term in banking and finance. It refers to lending money to a company or individual by a private individual or organization. While banks are traditional sources of financing for real estate, and other purposes, private money is offered by individuals or organizations and may have non traditional qualifying guidelines.
Private money can be similar to the prevailing rate of interest or it can be very expensive. When there is a higher risk associated with a particular transaction it is common for a private money lender to charge a rate of interest above the going rate.
Private money lenders
There are private money lenders in virtually every state in the United States, seeking a chance to earn above average rates of return on their money. With that comes the risk that a private money loan may not be re-paid on time or at all without legal action. Private money is offered to clients in many cases in which the banks have found the risk to be too high.
Private money regulation
Private money lenders must comply with state and federal usury laws. They are not exempt from banking laws. Further, if the loan is made to a consumer, the private money lender may have a limit on how many loans they may make in a particular state, without being required to have a banking license.