Benefits and Drawbacks of Direct Lending

Direct lending refers to corporate debt provision by lenders other than banks. Direct lenders provide loans directly to companies, bypassing the intermediaries of private equity firms, investment banks, and brokers. Unlike traditional lenders, direct lenders are often much more flexible than banks. This article discusses the benefits and drawbacks of working with these lenders. The information contained in this article is applicable to small businesses, mortgages, and mezzanine lenders

Payday loans

If you have bad credit and need a short-term loan, direct lenders are a good choice. This type of lender does not require a credit check and does not have a middleman, such as a pawn shop, who will raise your interest rate. Moreover, there are no hidden fees or charges with direct lenders. Here direct lenders are some things to consider when choosing direct lenders for payday loans. In addition, many direct lenders have good reputations and have been in the business for years.

Another advantage of direct lenders is that you can control the terms of your loan with them. You can negotiate terms and amount directly, which makes them more convenient and affordable. They may even tailor their terms to your needs, such as no large down payment. The fastest way to get a loan is to apply directly with a direct lender. However, there are a few downsides to going through a third party lender. They may not offer you the best interest rate or terms.


One of the main benefits of direct lenders is their ability to approve mortgages that larger institutions will not. Large lenders have strict guidelines to follow in order to identify qualified borrowers. Smaller, niche lenders have the experience to deal with borrowers who fall outside of these guidelines. In addition to the smaller size of the market, direct lenders can approve loans with higher interest rates. Listed below are some advantages of direct lenders for mortgages. Considering all the benefits, direct lenders are the way to go if you’re looking for a mortgage.

Unlike traditional mortgage brokers, direct lenders do not deal with middlemen. They work directly with the borrower, creating and funding the mortgage. The benefits of direct lenders are that they can walk borrowers through the entire process. In addition to avoiding middlemen, direct lenders also allow for quicker loan closings. They may charge higher rates than brokers, but they are also more flexible. If you’re looking for a quick mortgage, direct lenders may be the best option.

Small business loans

Borrowing from direct lenders may be your best bet if you are new to the business world, but it can be challenging to find the right option for your situation. Listed below are tips for selecting the best small business loans:

OnDeck: OnDeck is a leading small business lender. They offer a hassle-free online application and fast fulfillment of small business loans. With terms of up to 24 months, OnDeck allows you to borrow between $5,000 and $250,000 without incurring late fees or prepayment penalties. This is an especially good option if you are running a startup or have a small business with limited income. OnDeck also waives the origination fees for their loans, which makes them a great choice for business owners who want to start or expand their operations.

Mezzanine funds

If your business is seeking additional financing, you may be wondering whether to use direct lenders or mezzanine funds. Mezzanine financing offers an alternative to traditional bank lending for a variety of reasons. For one, it is less dilutive, allowing the business to raise more capital without compromising its equity. Second, mezzanine financing can increase a company’s returns on equity. If you are evaluating both options, you’ll have to consider the costs and benefits of each.

Mezzanine lenders look for proven, recurring revenue business models, and are not interested in turning around or investing in businesses with very short growth cycles. They generally prefer businesses with a revenue range of five million or more and a positive historical growth. Mezzanine funds may also limit your existing debt or limit your senior borrowing capacity. Generally, mezzanine funds prefer companies that are sponsored and have a proven track record of growth.

Commercial real estate loans

There are several types of commercial real estate loans. Depending on the purpose of the loan, you can choose to receive a fixed or adjustable rate loan, a term loan, or a combination of both. Commercial real estate loans from direct lenders can range anywhere from $50,000 to $1 million. Some lenders have lower FICO requirements than others, and you should be prepared to make a 20% down payment at closing. While traditional banks may have higher fees and interest rates, you’ll likely pay a lower rate.

Nonbank lenders are growing in popularity. Financial regulations such as Dodd-Frank Act and Basel III risk-capital rules have made it more difficult for traditional lenders to make loans. Since banks have to meet strict capital requirements, they have to focus on lending to the largest commercial real estate projects. Smaller borrowers, however, will need to find alternative sources of capital. Direct lenders are an excellent way to find a commercial real estate loan that is right for you.

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