Funding Deals with Bad Credit + No Reserves

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Funding Deals with Bad Credit + No Reserves

Deborah Wodell
Lender · Sanford, NC · Member since 2024 · 348 posts · 116 votes

I’d love to hear from other lenders and brokers on this...

How do you handle it when a borrower brings you a deal that looks solid on paper—strong ARV, low purchase price, great location—but they've got:

🔻 Credit in the low 500s
🔻 Zero reserves or liquidity
🔻 And no real track record

Do you consider the deal itself and try to structure something creative? Or is that usually where the conversation ends?

I know we all want to help people get started—but also have to protect the capital. Just curious how others walk that line.

Would love to hear your thoughts, insights, or stories (good or bad).

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  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    1y

    Good deal numbers are just the start; those other items are the del breakers.
    You're running a business, not a charity.

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  • Andrew Zamboroski
    Lender · Member since 2021 · 495 posts · 130 votes
    1y
    Quote from @Deborah Wodell:

    I’d love to hear from other lenders and brokers on this...

    How do you handle it when a borrower brings you a deal that looks solid on paper—strong ARV, low purchase price, great location—but they've got:

    🔻 Credit in the low 500s
    🔻 Zero reserves or liquidity
    🔻 And no real track record

    Do you consider the deal itself and try to structure something creative? Or is that usually where the conversation ends?

    I know we all want to help people get started—but also have to protect the capital. Just curious how others walk that line.

    Would love to hear your thoughts, insights, or stories (good or bad).

    It can be the best deal on paper, but it only comes to fruition if it gets finished. Doing your due diligence helps you stay profitable, prevent losing money, and/or keep your investor funds safe. 
    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y
    Quote from @Deborah Wodell:

    I’d love to hear from other lenders and brokers on this...

    How do you handle it when a borrower brings you a deal that looks solid on paper—strong ARV, low purchase price, great location—but they've got:

    🔻 Credit in the low 500s
    🔻 Zero reserves or liquidity
    🔻 And no real track record

    Do you consider the deal itself and try to structure something creative? Or is that usually where the conversation ends?

    I know we all want to help people get started—but also have to protect the capital. Just curious how others walk that line.

    Would love to hear your thoughts, insights, or stories (good or bad).


     No liquidity or reserves is a tough one to get around unless they have other real estate they own. No Money, No Honey. 

    Low Credit Score is an easy one. Usually a low LTV or higher rate/lender fee will work.

    No track record is also very easy. There are many lenders that will focus more on credit/credit score + reserves to qualify, instead of experience. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Deborah Wodell:

    I’d love to hear from other lenders and brokers on this...

    How do you handle it when a borrower brings you a deal that looks solid on paper—strong ARV, low purchase price, great location—but they've got:

    🔻 Credit in the low 500s
    🔻 Zero reserves or liquidity
    🔻 And no real track record

    Do you consider the deal itself and try to structure something creative? Or is that usually where the conversation ends?

    I know we all want to help people get started—but also have to protect the capital. Just curious how others walk that line.

    Would love to hear your thoughts, insights, or stories (good or bad).

    We’ve been in this space a long time, and we do not recommend moving forward with financing in these situations. Even if the deal itself pencils, the borrower often doesn’t have the foundation to execute. Partnering with someone experienced could be a better path.


    From our portfolio, we’ve seen a strong correlation between low credit scores and default rates. It's not anecdotal, the data backs it up. It’s no surprise banks with sophisticated underwriting systems choose not to lend in these scenarios.

    As lenders, we all want to be helpful, but we also have to be honest. Sometimes the best advice is: don’t do the deal, at least not alone.




    7e investments53 Reviews
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