Mark Falzone is a senior loan officer with Kennedy Funding
Financial, a nationwide direct lender based in Englewood
Cliffs, New Jersey. Falzone is a 14-year industry veteran and
is part of a team that has closed in excess of $2.5 billion
in hard-money loans to borrowers all over the globe. He
specializes in bridge loans for land, multifamily, retail and
hospitality properties. Reach Falzone at (800) 342-8500 or
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Direct Lenders Are Land-Deal Friendly
They are less risk averse than banks and offer the advantages
of speed and flexibility
By Mark Falzone
Traditional lenders, such as banks, typically consider land loans too risky to fund. Most look only at the tax returns, financial state- ments and creditworthiness of the borrower
as well as the current cash flow of the property.
Traditional lenders do not take the value of the land
or its future potential into consideration. Also, they
don’t want to end up with land that they were forced to
foreclose on, so they generally won’t even entertain land-loan applications when they come across their desks.
When it comes to land loans, borrowers and the
commercial mortgage brokers assisting them simply
have no other option except to explore alternative
funding sources. Private, alternative lenders can confidently step in and are more than willing to fund a land
loan. They look at the present value of the land and its
future potential. The loan is not based on a borrower’s
financial statement or tax return, which is good news
for developers who faced severe financial crises in the
last real estate bubble and have bad credit as a result.
Even if it’s for higher fees, shorter terms and at a
more conservative loan-to-value (LTV) ratio, borrowers
and their brokers often prefer the hard-money/private-lender approach because the loan is based on the
value of the land and its future potential, rather than
other factors irrelevant to the deal at hand. Alternative lenders aren’t all the same, however. While private
lenders and direct lenders are each known for their
less-strict criteria, a direct lender has distinct advantages in speed, flexibility and even geographic range.
Speed is the name of the game when it comes to securing a loan. Borrowers can miss out on unique opportunities if a land loan is delayed. To accommodate
these fast-moving opportunities as they come up,
lenders must be equipped to act quickly, and the best
way to guarantee quick action is to have direct access
For direct lenders, having immediate access to adequate sums of money is key to funding land loans in
days, instead of weeks or months. Unlike private lenders that may obtain funding from third-party sources,
direct lenders have the money available when needed,
on hand and ready to go for immediate use.
Some lenders and commercial mortgage brokers
use what is known as “table funding,” an option which
allows brokers to originate, process and close loans. At
the time of settlement, the loan is then transferred to
the lender, and the lender simultaneously advances
funds for the loan.
These loans are subject to the funding source’s rules
and policies. Direct lenders are more flexible than
traditional lenders, or even private lenders working with
third-party funds, because direct lenders are only
accountable to themselves. That eliminates the need
to get approval from a third party to fund the loan,
bypassing weeks of searching and clearing hurdles
presented by an outside group.
It’s not just the money that’s controlled by direct
lenders, which conduct all their business in-house,
from application review to servicing the loan long
after it’s approved.
Borrowers interact with the same experienced individuals from beginning to end. The same individual or
team that took the borrower through the application
process and through closing will continue to service
the loan. The loan won’t be sold off to an outside
company for continued management.
That in-house touch adds an extra layer of security
for the borrower, especially when dealing with something as risky as a land loan. The benefits don’t stop
at speed. Direct control of their money defines every
aspect of the loan-application process, particularly in
the types of projects a direct lender can fund.
Fast and agile
Traditional lenders often have rigid qualifications that
can’t be adjusted or avoided. Direct lenders have the
distinct advantage of being able to work outside of
Direct lenders can consider each loan application
on a case-by-case basis, instead of automatically rejecting less-than-perfect fits based on predetermined
criteria. Each mortgage application is reviewed on its
own merits, instead of being categorically rejected because the applicant’s credentials aren’t perfect.
While they still need to review tax returns and other
financials, direct lenders don’t assign them the same
weight as a bank or other traditional lender. Mandatory
items required to fund a loan by a direct lender include
a title search to identify any judgments or liens, a Phase
I environmental report, a land survey and an up-to-date
and accurate independent appraisal from a trusted
third-party provider. Minimizing requirements to what
matters for the deal itself reduces time spent shuffling
paper, conducting background checks and waiting.
For more articles on
View these articles and more at
“The Search for a Better Loan,”
Michael Boggiano, January 2017
“Private Lenders Bulk Up,”
Clark B. Briner, July 2016
“Small-Business Loans Make Sense,”
Noah Grayson, March 2016
“Close the Deal With a Little Help,”
Jan B. Brzeski, May 2017