A private investment fund that makes or buys loans with money raised from investors, instead of taking deposits the way a bank or credit union does.
A Federal Reserve staff note describes a private credit fund as a closed-end pooled investment vehicle that originates or invests in loans, and says it is not required to be registered or regulated as an investment company. It describes private credit as negotiated one to one between borrower and lender, outside traditional bank regulation. In real estate, the same kind of vehicle is called a debt fund.
Borrowers usually meet a debt fund on a deal a bank will not take as it stands: a building being renovated or leased up, a purchase that must close fast, or a loan that is larger against the property’s value than a bank will make. The loan is typically a bridge loan, which the OCC handbook describes as short-term financing, usually up to three years, that carries a property to stabilization so it can be sold or refinanced with permanent debt.
What changes for you is the trade. A fund answers to its investors, not to bank examiners, so it can move faster and structure more freely. It charges for that in rate and fees, and it expects to be repaid by a sale or refinance, so it will test your exit plan as hard as your purchase.
How it shows up in the data here
Debt funds are mostly outside this site's data. A fund files no bank or credit union call report. A fund or its lending arm appears here only where it reported housing loans under HMDA or made SBA loans. To see non-bank lenders that are on the record, use search filtered to non-bank lenders. For banks, see construction lenders.
Go further
- Non-bank lenders in search: Lenders that are not banks or credit unions and appear in HMDA or SBA records.
- When a bank says no: Where a declined request can go next.
- Debt yield calculator: Cash flow over the loan. The one ratio that ignores the rate, the amortization and the cap rate.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- What to do after a bank says no to a business loan: One bank's no is one lender's answer, and the reasons are yours to ask for. They usually point to a constraint you can name.
Related terms
- Non-bank lender: A non-bank lender is a company that makes loans but does not take deposits, so it is not a bank, a savings institution or a credit union.
- Bridge loan: A short-term loan that carries a newly built or newly bought commercial property until it is leased and earning enough to be sold or refinanced with a permanent loan.
- Hard money loan: A short-term real estate loan from a private or non-bank lender that is decided mainly on the property's value and the exit plan, not on the borrower's income.
- Value-add: Buying an underperforming property and raising its income through renovation, repairs or stronger management. Lenders call it repositioning or rehabilitation.
- Lease-up: The period after a building is finished or renovated while it fills with tenants and its income climbs toward a stable level.
- Life company lender: A life insurance company that makes long-term, fixed-rate commercial mortgage loans with its own investment money and usually keeps them.
- CMBS conduit loan: A commercial property loan made to be pooled with other loans and sold to investors as commercial mortgage-backed securities, not kept by the lender that made it.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.