When you're borrowing money to finance a real estate project, whether it's a fix-and-flip or new construction, it's easy to focus only on the interest rate, fees, and how quickly the lender can close. But there's another critical factor that borrowers often overlook: how the lender sources their capital.

 

This behind-the-scenes detail can have a major impact on your experience as a borrower. It affects everything from reliability and flexibility to speed and consistency. Let's break down the common ways hard money lenders source capital and why it matters to you.

Some hard money "lenders" are really just brokers. They don't lend their own money—instead, they shop your loan around to other funding sources. While brokers can sometimes get you access to niche products, there are tradeoffs:

 

• Longer closing times due to back-and-forth with third-party capital providers
• Less control over underwriting and draw management
• Higher fees since the broker takes a cut

Other hard money lenders originate loans directly, but don't hold them on their books. Instead, they sell the loans to institutional buyers shortly after closing. This model can support high volume and may offer competitive rates, but it can introduce other downsides:

 

• Tight underwriting criteria driven by what end buyers require
• Limited flexibility if your deal doesn't fit the box
• Servicing challenges if your loan is handed off to a different company after closing

Then there are hard money lenders who fund loans using their own capital or that of a dedicated fund. These are known as balance sheet lenders. Because they own the full lending relationship, they have:

 

• More control and flexibility over underwriting, terms, and draw schedules
• Faster decisions and more consistent communication
• Aligned incentives to see your project succeed

At Upright, we believe strongly in reliability and consistency. That's why we fund loans through our own managed fund: the Horizon Residential Income Fund.

This gives us the ability to:

 

• Make decisions quickly and stand behind our term sheets
• Offer consistent terms and draw processes across all deals
• Work with borrowers as a true partner, not just a pass-through entity

 

When your hard money lender controls their capital, they can focus on long-term relationships, not just transactional volume. And that can make all the difference when you're on a tight timeline or dealing with the inevitable surprises of a renovation or new build.

 

Not all lenders are created equal, and understanding how your lender sources their capital can help you choose the right partner for your next project. At Upright, we manage our own capital because we believe in the power of consistency, speed, and service.

 

If you're looking for a lending partner who brings both capital and commitment to the table, let's talk.