Why this Real Estate Lender is Going Long

Patch of Land, an online lender for real estate loans added a mid-term loan option for 2-5 years starting at 6 percent.

The LA-based lender issued loans starting at 10 percent for up to two years. The company uses a data-driven underwriting model and promises investors a risk adjusted return with extensive available data to support the underlying credit decision on each loan.

Patch of Land provides loans ranging from $100,000 to $5 million and prides itself on providing quick loans. These short term loans are called ‘bridge loans’ and as the name suggests are a bridge until the borrower secures permanent capital. The company on its website noted, “Although this type of financing has relatively high interest rates, it allows the user to meet current obligations because it provides immediate cash flow.”

Should this be considered in the larger context of the commercial real estate environment, it aligns with the general attitude of caution among lenders towards big projects. CNBC quoted real estate firm CBRE and said that it “conservatively” estimates that 18 percent of loans this year and 29 percent of loans next year to have refinancing problems as investors move away from commercial real estate bonds. CBRE estimates $43 billion to be in “troubled loans” over the next two years.

Should other lenders pay attention?