The Multifamily Investor's Playbook for Working With Non-Bank Lenders
Non-bank lenders provide needed flexibility for complex deals and tight timelines. Understanding how to work with these alternative capital sources can open up plenty of opportunities.
- Debt Funds: The New Aggressive Capital
- Credit Unions: The Hidden Multifamily Champions
- Life Companies: Patient Capital for Quality Assets
- Private Lenders and Family Offices
- Bridge Lenders: Speed and Complexity Specialists
- Working Effectively with Non-Bank Lenders
- Building Your Non-Bank Network
- Get Financing
Most experienced investors cut their teeth working with community banks and regional lenders. But as your deals get more complex — faster timelines, unique properties, creative structures — traditional banks may start hitting their limits.
Non-bank lenders can fill gaps that conventional financing can't (or won't) handle. They're often more expensive, but they offer speed, flexibility, and appetite for deals that would never make it through a bank's credit committee.
Understanding how to work effectively with these alternative capital sources can be the difference between closing challenging deals and watching them fall apart.
Debt Funds: The New Aggressive Capital
Debt funds have become major players in multifamily financing, especially for deals between $5 and $50 million. They operate under different constraints than banks — no deposit regulations, fewer geographic restrictions, and more flexible underwriting guidelines.
Most debt funds target returns between 8% and 15%, which translates to borrower rates typically 200 to 400 basis points above traditional bank financing. Before you grimace, there is a plus: They can often close in 2 to 3 weeks (compared to around 45 to 60 days for many banks).
Fund lifecycles matter more than most borrowers realize. Funds with fresh capital are usually aggressive on new deals. Funds approaching the end of their investment period might be pickier or focused on existing portfolio companies.
Debt funds typically prefer deals they understand well — value-add multifamily, ground-up development, or acquisitions with complexity that traditional lenders avoid. They're less interested in stabilized assets, unless there's a compelling reason banks can't provide financing.
Credit Unions: The Hidden Multifamily Champions
You might assume they behave similarly to banks, but credit unions consistently surprise investors with competitive multifamily loans. Many have aggressive appetites for apartment deals, especially from borrowers who meet their membership requirements.
Membership usually requires some connection to their field of membership — living in their service area, working for partner employers, or joining affiliated organizations. The requirements are often broader than they appear.
Credit unions typically offer relationship-focused lending with more flexible underwriting than banks. They might overlook minor credit issues or accept lower debt service coverage ratios for strong borrowers.
Geographic focus is usually narrow but deep. A credit union might only lend in three counties but be the most aggressive multifamily lender in those markets. They often have excellent local market knowledge and established professional networks.
The downside is, usually, speed and sophistication. Credit unions often take longer to close and may lack experience with complex transactions. But for straightforward deals in their market areas, they can offer fantastic terms.
Life Companies: Patient Capital for Quality Assets
Life insurance companies provide some of the best long-term financing available — often 10+ year terms with attractive rates for high-quality properties. But they're extremely selective about deals and sponsors.
They typically want larger loans ($10 million or more), excellent properties in strong markets, and experienced sponsors with significant net worth. Their underwriting is thorough and slow, often taking 60 to 90 days for approval.
Life companies excel at financing core and core-plus assets — stabilized properties with strong cash flow and limited risk. They're usually not interested in value-add deals or anything requiring significant capital improvements.
The relationship component is really important here. Life companies prefer to work with sponsors who can provide a pipeline of similar deals over time. One-off transactions are possible but less attractive to them.
Private Lenders and Family Offices
Private lenders — including high-net-worth individuals and family offices — often provide the most flexible financing available. They can structure deals that institutional lenders would never consider.
Relationship and trust matter more than anything else with private capital. These lenders are essentially investing in you as much as the specific deal. Personal chemistry and track record often outweigh minor deal imperfections.
Due diligence expectations vary widely. Some private lenders rely heavily on third-party reports and formal processes. Others make decisions based primarily on sponsor relationships and basic property evaluation.
Communication styles differ significantly from institutional lenders. Private lenders often prefer direct phone conversations over formal presentations. They want to understand the story behind the deal, not just the numbers.
Fee structures can be creative — equity participation, development fees, or performance bonuses alongside traditional interest. This flexibility can create win-win structures that banks couldn't offer.
Bridge Lenders: Speed and Complexity Specialists
Bridge lenders specialize in situations where speed matters more than cost. They're often the best choice for competitive acquisitions, refinancing balloon payments, or funding renovations quickly.
Most bridge loans are designed as short-term solutions with clear exit strategies. Lenders want to see a realistic path to permanent financing within 12 to 24, sometimes 36, months.
Fee structures are typically higher than traditional financing — origination fees of 1% to 3% plus rates often 300 to 600 basis points above bank financing. But the speed and certainty of execution can justify the cost.
Bridge lenders usually require more sponsor equity and personal guarantees than traditional lenders. They're taking execution risk in exchange for speed, so they want strong downside protection.
The best bridge lenders bring more than just capital — they often have relationships with contractors, property managers, and permanent lenders that can help execute your business plan.
Working Effectively with Non-Bank Lenders
Non-bank lenders operate differently than traditional banks. Decision making is often faster but more relationship dependent. Key decision makers are usually more accessible but expect direct communication.
Due diligence requirements vary wildly across the board. Some non-bank lenders require extensive documentation similar to banks. Others rely more on sponsor interviews and property inspections than formal reports.
Flexibility is the main advantage, but it requires clear communication about what you need. Non-bank lenders can often structure deals that banks couldn't, but you need to articulate why standard structures don't work.
Relationship maintenance matters more with non-bank lenders. They're often investing their own capital or managing smaller pools of money, making each relationship more valuable. Regular updates and early communication about potential deals help maintain strong connections.
Many experienced investors never discover the full range of non-bank capital available because these lenders don't always market aggressively. Having access to comprehensive directories that include debt funds, credit unions, private lenders, and family offices — like what Janover Pro provides — reveals financing options that can transform challenging deals into profitable opportunities.
Building Your Non-Bank Network
Start building non-bank relationships before you need them. These lenders often prefer to understand your business and track record before considering specific deals.
Focus on lenders whose typical deal profile matches your investment strategy. A debt fund focused on ground-up development won't be interested in your stabilized acquisition, regardless of how good the deal is.
Understand each lender's decision-making process and timeline requirements. Some private lenders can commit in days, while life companies might need months. Plan your deal timelines accordingly.
Maintain relationships even when you're not actively seeking financing. Non-bank lenders often have limited capital to deploy, so staying top-of-mind when they have availability is really important.
Non-bank financing is often about solving problems that traditional lenders can't handle. When positioned correctly, the higher cost becomes an investment in speed, flexibility, or deal completion rather than just an expensive alternative.