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Loans for Purchasing NPLs and Performing Loans
NPLs, or non-performing loans, are often sold at a heavy discount, and savvy investors can use them to acquire underlying assets, recoup the outstanding loan amount, and more.
Non-performing loans (NPLs) or performing loans can be wise investment opportunities, depending on your experience, business strategy, and risk appetite.
There are many reasons to purchase NPLs and other notes. They can be a way of acquiring a loan's underlying collateral, getting an equity stake in a business, or restructuring financing to enable a borrower to pay back most or all of the outstanding principal.
NPLs in particular are often sold at a steep discount compared to their attached loan value. However these notes require a very strong understanding of the risk involved and a solid business strategy to turn around.
Using Financing to Acquire NPLs or Performing Loans
There are some options for financing the purchase of an NPL or a performing loan.
Note: The inherent risk in buying NPLs generally means that most lenders will require more from a borrower and offer less favorable terms compared to performing loans.
For loan terms, this could mean more stringent collateral requirements, higher interest rates, and lower loan-to-value allowances. For borrower requirements, a lender could require higher personal credit scores or a clear history of successfully investing in NPLs.
Bank Loans
Loans from banks or credit unions are commonly used to finance NPL and performing loan acquisitions. While few have dedicated financing products for buying loans, many investors use lines of credit or use refinancing to unlock equity in a real estate portfolio to fund these purchases.
The lender will require a borrower to have a strong business plan for turning any NPL around, and collateral will be necessary depending on the loan amount.
Investor Financing
Another way to fund the acquisition of NPLs or performing loans would be to work with another investor or group of investors. This could be done through a partnership or joint venture or even through selling shares in your company to finance the purchase of the loans.
Find a Loan
If you are looking for funding to purchase an NPL or a performing loan, enter your details into the form below. Our financial advisors will be in touch.