If you’re investing in commercial real estate, there’s one critical decision you’ll need to make early on. Whether it’s a retail center, multifamily building, or office space, you should think about whether you’ll borrow from private lenders vs banks, the latter being the more traditional option.
Both options can help you finance your next acquisition or refinance an existing loan. Ultimately, the difference that lies in speed, flexibility, and qualification criteria is substantial. Understanding those differences can help you choose the right partner to close your deal successfully and on time.
At Fidelity Mortgage Lenders, we’ve worked with thousands of investors across California, Texas, Colorado, and beyond. Many of them came to us after experiencing delays or denials from banks. In this guide, we break down how private lenders vs banks compare when it comes to commercial real estate financing.
Understanding the Basics
What Is a Commercial Bank Loan?
Traditional financial institutions are in charge of issuing commercial bank loans. Typically, national or regional banks handle business-related real estate purchases. These loans are often long-term, have relatively low interest rates, and come with strict eligibility requirements.
Key Features of Bank Loans:
- Competitive interest rates (but often variable)
- Long application timelines (30–90+ days)
- Extensive documentation requirements
- Rigid loan terms and underwriting criteria
- Preference for prime borrowers with high credit scores
That being said, banks are a good fit if you have time and your property type fits a conventional mold, but today’s investors don’t always have that luxury.
What Is a Private Money Lender?
A private lender is a non-bank entity or individual that offers real estate-backed loans, often called “hard money” or “private money” loans. As a result, these lenders focus on the value of the asset rather than the borrower’s tax returns or personal credit, and they offer more flexibility and faster funding
Key Features of Private Lenders:
- Quick closings—often within 10 days
- Flexible terms and customized loan structures
- Asset-based underwriting (property-first, not paperwork-heavy)
- No personal guarantees required
- Ideal for complex or time-sensitive transactions
Key Differences That Matter in Private Lenders vs Banks
Speed
One of the most noticeable advantages of working with a private lender is how fast it can close. On one hand, a bank loan may take anywhere from 45 to 90 days to close. I contrast, a private loan can be approved and funded in as little as 7 to 10 business days. Potentially, waiting for a bank could cost you a deal if you’re under a deadline, such as a 1031 exchange or a seller with multiple offers.
Qualification Criteria
Banks rely on rigid underwriting standards, often requiring high credit scores, in-depth income verification, and personal guarantees. If your financials are less than perfect, or if you’re self-employed or investing through a trust or LLC, these requirements can become roadblocks.
Flexibility in Loan Structure
Another important distinction is how each lender structures the loan. Banks typically offer non-negotiable terms like fixed amortization schedules, conservative loan-to-value ratios, and limited flexibility for creative deal structuring. Private money lenders bring far more flexibility to the table. At Fidelity, we offer interest-only options, amortized loans up to 20 years, and unique structures like seller carry-back and second trust deeds. This kind of flexibility allows investors to tailor the loan to the project’s timeline, cash flow, and exit strategy.
Property Type and Location
Banks tend to favor stabilized, institutional-grade assets. Properties that are partially vacant, under renovation, or in non-traditional sectors like cannabis, mixed-use, or automotive may not qualify under a bank’s risk model.
Private money lenders are more open to unconventional or niche property types. Fidelity finances a wide variety of commercial and non-owner-occupied residential properties across California, Colorado, Idaho, Montana, Oregon, Texas, Utah, Washington, and—if requested—Nevada.
The Trade-Off of Private Lenders vs Banks: Rates and Control
One clear example is that private money lenders generally charge higher interest rates than banks. After all, you pay for speed, reduced friction, and the ability to close on terms that align with your needs, not the bank’s policies.
Many borrowers consider the higher rate a worthwhile trade-off. Consequently, private lenders deliver value beyond the interest rate when time is critical or flexibility is essential to closing a deal.
Which Option Is Right for You?
The decision between private lenders vs banks ultimately comes down to your priorities. If you have excellent credit, a stabilized asset, and plenty of time to wait, a bank may offer the lowest cost of capital.
If you’re on a tight timeline, investing in a non-traditional property, or need a lender who can structure a deal creatively, private lending could be the right fit.
At Fidelity Mortgage Lenders, we work with investors, brokers, and business owners to fund real estate deals that don’t fit neatly into a bank’s underwriting box. Our process is straightforward, fast, and built on real-world experience. Moreover, we are backed by decades of lending across a variety of markets and property types.
Final Thoughts
Private lenders vs banks serve different needs in the real estate financing landscape. By understanding the differences in speed, requirements, and flexibility, you can choose the path that helps you meet your goals more efficiently.
If you’re weighing your options or if you’ve already run into challenges with a bank, we’re here to help. Visit https://fidelityca.com/ and let’s talk about your project, review your options, and find the financing that works for you.
Contact our team today to get started!
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