Simple words cause a surprising amount of confusion in private lending.
I recently had a conversation with Valery Saunders about this at Geraci’s annual Elevate conference.
It was a very relevant topic for this crowd: largely agents, brokers, and professionals who are looking to break into private lending. Overlapping terminology is a major stumbling block when you first step into this space.
But the truth is, our terminology can even trip up veteran agents and brokers, not to mention borrowers who don’t realize how much ambiguity there can be.
“Private lender.” “Investor.” “Bridge loan.” These terms seem obvious enough. But we see it all the time: you can have two people using the same words, thinking they’re aligned, and they’re actually describing two completely different things.
If you’re a veteran lender, you already know where I’m going with this. Not being clear about terminology can lead to a variety of bad outcomes: confusion, wasted time, missed opportunities, or in extreme cases even legal repercussions.
You can see the full conversation below. If you’re looking for the part where we talk about getting fined or landing in jail, it starts just after the 9:00 mark (you’ll know because we start talking about donuts).
This isn’t about semantics. It shows up in some really practical ways with real consequences. Here are a couple of the most common.
Brokers Placing Deals
Brokers run into this all the time.
For example, a broker might hear “private lender” and assume a certain level of flexibility or a certain way the deal will be evaluated. But depending on how that lender is actually structured (where the capital comes from, what they need to do with the loan after closing) that same deal can look very different on the other side.
So you get a deal that looks fine going in, but then starts to drag. Then the lender starts sending back questions you didn’t expect. Then the terms change. Eventually it either dies or has to be sent somewhere else.
In a lot of cases, the issue isn’t the deal. It’s that it was sent to a lender that was never really a fit.
Borrowers Looking for Financing
Confusion over terminology can be even more dangerous to borrowers.
For example, someone hears “private loan” and assumes it’s just a more flexible version of a bank loan. Faster, maybe a little less documentation, but otherwise similar.
But depending on the lender, that loan might be much more focused on the asset than the borrower, or built around a very specific exit. It may be less forgiving if something changes midstream.
So you end up with situations where the borrower is surprised by how the deal is structured or how the lender behaves during the process. Sometimes that just creates friction. Sometimes it’s enough to kill the deal.
Again, it comes back to the same issue. The language sounds familiar, but it’s covering a wide range of very different things.
This isn’t about anyone doing anything wrong. It’s just a function of how broad this space has become.
You’ve got different types of capital, different business models, and different levels of regulation all sitting under the same general umbrella. The language hasn’t really caught up.
This is especially important if you’re placing deals, working with borrowers, or trying to understand how something will be evaluated on the other side.
A lot of the time, it’s just a matter of slowing down and making sure everyone’s on the same page from the start. That clarity upfront can save a lot of wasted time and effort later.
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