When a borrower sees a 12 percent interest rate on a private loan and compares it to a bank's 6 percent, the math seems straightforward. But according to H. Jack Miller, founder of Gelt Financial, a national private lender with nearly 40 years in the market, that comparison misses the real cost of capital. Miller says borrowers who walk away from private capital because of the rate often end up paying more in ways they didn't account for.
Miller calls the stigma around private lending the "Tony Soprano perception," where private capital is associated with loan sharking or desperate measures. The reality, he says, is the opposite. "Our borrowers are so grateful to us. We're coming through in four or five days when everyone else said no or told them to wait two months. The people leaving us Google reviews aren't upset about the rate. They're thanking us for saving their deal."
He points to Elon Musk as an example: the wealthiest person in the world doesn't borrow at 6 percent. He raises capital through private equity and venture funding, which, when factoring in equity surrendered, costs more than 12 percent. Miller argues that the real alternative to private capital is often more expensive. He recounts a common scenario where a local investor brings in a family member for funding in exchange for half the profit. "That's what people think of as the acceptable option," Miller says. "But when you do the economics, giving up 50 percent of your profits is far more expensive than borrowing the money at 12 percent. And you have to deal with that person at every dinner table for the rest of your life."
Gelt Financial went through the 2008 financial crisis and experienced hundreds of defaults. Miller describes the aftermath as clarifying. "We went back through everything that went bad and asked where did we lose money, and where we didn't. What we found was when we stayed disciplined, we didn't lose a penny. Every single loss came from exceptions." He draws a distinction between Gelt and newer entrants in the private lending market that have never operated through a significant downturn, stating that discipline from surviving the Great Recession cannot be replicated.
The structural shift in real estate financing is permanent, Miller believes. Banks have become more restrictive, and private capital has grown more sophisticated. For time-sensitive deals, bridge transactions, and borrowers who don't fit the bank template, private capital is increasingly the first call. "Sophisticated operators understand that if the deal works at the cost of capital, the cost of capital is not the problem." Gelt's track record across hundreds of closed deals reflects that logic in practice: fast, flexible financing for borrowers who need to move and deals that make sense on the numbers.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice.
