You have a deal under contract and three private money lenders in your inbox quoting numbers that look similar. Price is the least reliable way to choose between them. This is the diligence a working investor runs first, the term-sheet language that decides the outcome, and the public records that confirm the story.
Key Takeaways
- Vet the counterparty before the price. Performance risk costs more than a point ever will.
- Ask whose balance sheet funds the loan, who signs off after valuation, and what the advance looks like after every holdback.
- Six term-sheet lines decide your economics: accrual, reserve, draws, extension, prepayment, and recourse.
- Verify through NMLS Consumer Access, secretary of state filings, and recorded mortgages rather than marketing pages.
Vetting Is a Capital Decision, Not a Shopping Trip
Choosing among private money lenders looks like shopping and is not. You are picking a counterparty who will hold your closing date, your draw schedule, and your credibility with a seller. A cheap quote from a shop that cannot perform is the most expensive thing in this business.
The useful news is that lenders are easy to sort once you ask structural questions instead of price questions. Three of them do most of the work.
The Questions That Separate Lenders from Letterhead
Whose Capital Is This?
Ask plainly and listen for a plain answer. A lender funding from its own balance sheet says so in one sentence. A shop that must place your file elsewhere first will hedge, and that hedge is the sound of a hand-off you pay for in calendar days. CR Equity AI is a direct lender that lends its own capital, plus 20+ lending partners on one platform, so the answer on our side of the table is short. Then ask the follow-up: have you funded in my state, on this property type, this year?
Who Says Yes, and When?
Map the decision path before you send anything. Who issues the term sheet? Who signs off after valuation? Is there a committee, and does it meet on a schedule or on demand? At what point does an indicative quote become a commitment subject only to written conditions? A lender who cannot describe that in two minutes will not describe it any better in week three, when you need an answer by Friday.
What Is the Real Advance, After Holdbacks?
Gross loan amount is a marketing number. Cash to close and cash available mid-project are the operating numbers. Subtract the interest reserve, origination taken at closing, renovation funds held until inspected, and any lender escrow. Two lenders quoting identical headline leverage can leave you with very different amounts of usable money.
Where the Money Hides in a Term Sheet
Ask for these six items in writing before you compare anything.
Six term-sheet lines investors skip and later regret
| Line Item | The Question to Ask | Why It Matters |
|---|---|---|
| Interest accrual | On the drawn balance or the full commitment? | Paying on undrawn holdback money is a silent cost |
| Interest reserve | Withheld at closing or billed monthly? | Sets your cash at closing and your tolerance for delay |
| Draw process | Who inspects, on what cycle, how many draws? | Draw friction is the leading cause of schedule slip |
| Extension | Priced and available, or purely discretionary? | Discretionary means renegotiating from a weak seat |
| Prepayment | Minimum interest, lockout, or neither? | A fast, profitable exit can trigger the largest penalty |
| Recourse | Who guarantees, and for what carve-outs? | Personal exposure is a term, not a formality |
Running this checklist on a live deal? Put CR Equity AI alongside whoever else you are talking to and compare the six lines above, not the headline rate.
What a Stalled Draw Actually Costs
Illustrative worked example
You budget a four-month rehab on a $420,000 purchase with a $95,000 scope. Assume total monthly carry, debt service plus taxes, insurance, and utilities, runs $4,200.
Your lender inspects on a ten-business-day cycle across four draws. If each draw lands five days late, you have added roughly a month to the project. That is about $4,200 in carry, a contractor who quietly reprioritizes your job, and a listing that now hits the market in a slower month.
None of that appears on a term sheet. All of it appears in your return.
Illustrative only. Not a quote or a commitment to lend. Figures are hypothetical.
Red Flags, and Where to Verify What You Are Told
Three patterns deserve a hard stop: a large non-refundable fee demanded before any diligence has happened, an unwillingness to name the source of funds, and a quote that moves materially after valuation with no explanation tied to the report.
Then verify instead of trusting. Look the company up on NMLS Consumer Access, where ours is NMLS ID 2797309. Confirm the entity is in good standing with the secretary of state where it is organized. Run a county records search for mortgages or deeds of trust recorded in the lender’s name, which shows whether they actually fund rather than refer. Ask for references you can telephone.
For the operating detail behind these questions, read What a Hard Money Lender Actually Does in 2026 (And What Has Changed) and Asset-Based Lending for Real Estate: When the Property Is the Underwrite.
Where We Lend
CR Equity AI lends its own capital on business-purpose loans secured by non-owner-occupied property in 48 states, operating out of Tallahassee, Florida with headquarters in Alexandria, Virginia.
Frequently Asked Questions
What Is a Private Money Lender in Real Estate?
A non-bank lender that makes business-purpose loans secured by investment property, underwriting the asset and the exit rather than a long employment history. Private lenders fund acquisitions, rehabs, bridge periods, and partner buyouts on terms and timelines that depository institutions generally cannot match.
How Do I Verify That a Private Lender Is Legitimate?
Search NMLS Consumer Access for the company record, confirm the entity is active with the secretary of state where it is organized, and search county land records for mortgages recorded in the lender’s name. A lender that funds leaves a public paper trail. One that only refers files usually does not.
What Will a Private Money Lender Ask Me For?
Typically the purchase contract or existing payoff, a line-item scope of work with a contractor bid, entity formation documents and authority, evidence of liquidity, an insurance binder naming the correct parties, and a written exit. Income-producing property adds a rent roll and trailing operating statements.
Do Private Money Lenders Run Credit?
Most do, including us. CR Equity AI uses a soft credit pull at pre-qualification, which is a soft inquiry and does not affect your score, and a hard pull may occur later in the process. Credit shapes structure and pricing rather than serving as the single pass or fail test.
Should I Use a Broker to Reach Private Lenders?
Sometimes. A good broker earns the fee on complex files, unusual collateral, or when you need several structures compared quickly. On a straightforward deal with a direct lender, the extra layer mostly adds a hand-off. Decide based on the complexity of the file, not on habit.
Run Us Through Your Own Checklist
Ask us the three questions above and we will answer them in writing before you send a single document.
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About the Author
Robert S. Stewart Jr. is the Founder and CEO of CR Equity AI, Inc., an AI-native specialty real estate private credit and commercial lending platform founded in 2021. He is a U.S. military veteran and a licensed real estate professional in Florida and Virginia, and has personally originated all 477 loans CR Equity AI has closed since inception, representing more than $300 million in originations. CR Equity AI was named to the Inc. 5000 at #1036.
CR Equity AI, Inc. | NMLS ID 2797309 | 2308 Mount Vernon Ave, Suite 206, Alexandria, VA 22302
This article is provided for general informational purposes only and is not an offer, commitment, or solicitation to lend, and is not legal, tax, accounting, or investment advice. CR Equity AI originates business-purpose loans secured by non-owner-occupied real property in 48 states; products, availability, terms, and eligibility criteria vary by state, property type, transaction, and borrower, and are subject to underwriting, credit approval, and final documentation. Any figures shown are illustrative examples, not quoted terms. Nothing herein constitutes a consumer credit offer. Equal opportunity lender.