Anyone else private lending at smaller balances -- and feeling like the only one?

Question

I've been doing some private lending for a while now and one thing that surprises me is how many people assume you need a ton of cash to get started as a private lender — like you have to be able to fund an entire deal on your own before you can even Invest. I've come to learn that, that assumption keeps a lot of people on the sidelines who probably don't need to be there.

There's actually a much larger, quieter group of people — myself included — who have capital to deploy, believe in private lending as a strategy, and just aren't at a scale where they can fund an entire deal alone. And I've also learned, they don't have to fund the entire deal.

I've been thinking a lot about how smaller lenders might benefit from simply knowing each other — sharing deal flow, underwriting perspectives, and potentially collaborating on deals that would otherwise be out of reach for any one person.

Curious if others here are in a similar position. Are you doing private lending at smaller balances? Have you ever connected with other lenders to collaborate, or is that not something people do?

Would love to hear how others are approaching this.

Tammy White · Answer

@Tara Carter - we have a ladies group of PMLs on Facebook and I also just started a self-funded group of PMLs for us to share experiences, discuss lending, and learn. I sent you a DM.

Tara Carter · Answer

I started private lending small balances in the last year. I've not connected with other lenders yet, but would love to.

Tammy White · Answer

@Jay Hinrichs

These are business-purpose, real-estate-backed loans. I do not lend in California.

My role is as a participating lender, not as the person brokering or structuring the transaction. When I participate in a loan, my return is based on the amount I personally fund. The transaction is structured, documented, and closed by the party handling the loan documents, title, and closing.

From my understanding, the key issue is not whether multiple lenders can participate in one private loan, but whether the transaction is properly structured and whether the parties involved are operating within the applicable state rules.

Doug Smith · Answer

I agree. I wish I knew more small private lenders as well. We're a larger lender and we don't do smaller loans, but saying no because a loan is too small to make sense for us opens us up to having referral sources get to meet new lenders and leave us. I would much, much rather forge relationships with smaller lenders that can step in. At least with the referral we solve the customer's problem. There are times when we're flush with capital and other times we don't have enough. That is likely the case with most lenders. Having those relationships, I have found, are critical. Great post.

Chris Seveney · Answer

We typically do not do smaller balances because it's takes the same amount of time to underwrite a loan and we are a company with overhead so for example a $10 or $20k loan for us would cause us to lose money

Jay Hinrichs · Answer

Tammy one of the issues is knowing the laws.. your in CA.. it is legal to do fractionalized loans up to 10 investors per loan before you need to do a securities document.

in other states its not legal.. Like Oregon you may not do any fractionalized loans you must do a real estate paper offering. so you can only do one beneficiary per loan legally.

And in CA you need a RE brokers license or an MLO  or consumer finance license other wise your going to run into legal issues and usury issues.

So as a CA RE broker myself thats how I did all my HML back in the day.. they were all fractionalized even when i was active in CA in 87 to 92 our average loan was 300 to 350k so it was a must to put investor together to do the deals.