Private Money Lending

[Amir Vahab]

Hi Everyone, I am a residential flipper in Atlanta, GA and I have a few questions regarding private money lenders. I have personally flipped 2 homes, but I am now in the process of developing a business plan to solicit outside private money lenders. I have covered most of my bases by gathering info from BiggerPockets and other online sources. 

I am in the process of developing the details of our promissory note and gathering intel to speak intelligently on how the lenders funds will be held and how it is used. Our lenders will fund a % of the asset purchase, and they will fund a % of the renovation costs. Obviously, the lender will wire funds at closing for the purchase, BUT how does my LLC hold the funds the lender is contributing to the renovation? The money will be used in draws, but the total invested money for the renovation will be contributed by the lender up front.

Does the lender simply cut our LLC a check and the promissory note state that we owe them X dollars with X percent interest? Are the funds held in a special bank account? How would you structure the holding of the funds to give the lender the most confidence and make is easy for the LLC to access when needed?

Thanks for your help and knowledge!