Prior to the 2008 financial crisis, traditional lenders actively courted and quickly facilitated loan transactions for individuals and small businesses. However, when the housing market collapsed, new regulations caused changes in the behavior of traditional lenders, which has had a significant impact on small business and individual borrowers.
In his Western Real Estate Business article “The Opportunity and Risk of Private Lending,” iBorrowco-executive chairman Harlan Peltz addresses private lending, how it came to be and its evolution going forward.
Private lending, which has been a meaningful part of the financial ecosystem for generations, emerged as a possible solution to the needs of undeserved borrowers. Yet, as private lending is poised to play an increasingly important role, regulators are developing criteria for private loan transactions that can increase transparency and investor protection. “In many ways, private lending is undergoing the natural evolution of a shadow activity to a mainstream activity, marked by increased regulatory scrutiny and higher investor standards,” said Peltz. “But until this transition is complete, investors in private lending transactions should be cautious.”