Alternative Lending (B Lending)
Definition
Alternative lending sits between bank financing and private financing, serving borrowers with self-employment income, bruised credit, or debt ratios beyond prime guidelines.
How it works
Alternative lenders are usually trust companies, credit unions, and monoline lenders. They apply common-sense underwriting — accepting bank-statement income for the self-employed, or a recent credit event with a clear explanation — rather than declining automatically.
Pricing sits above prime rates but well below private rates, and a lender fee of roughly 1% is common. Down payment requirements typically start at 20%, and terms are often one to three years.
The intent is almost always temporary. Most alternative files are structured so that after a term of clean payments and documented income, the borrower can move to a prime lender at a lower rate.
Quick facts
- Priced between prime and private financing.
- Usually needs at least 20% down.
- Designed as a one- to three-year bridge back to prime.
Put this into practice
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