In transactional funding programs, the lenders offer investors 100% of the required amount for potential investment as long as there’s an end buyer or seller 2nd that is to be recorded. And since no credit reports are required, the approval timeline for a transactional loan is usually pretty short, typically between 24 hours to two days.

The loan repayment timeline is also short, with most transactional lenders offering a maximum of 14 days. Transactional funding transactions often include four key players; the original owner the seller(A), the investor(B), the end buyer(C), and a private money lender. This is because a double or simultaneous closing must occur for the deal to be complete.

Here’s a simplified breakdown of how transactional funding works :

(B) the investor finds an asset they are interested in, for instance, a wholesale property. They approach the original owner, in this case, A, with an offer. (A) the seller accepts and signs a contract agreeing to sell their property to (B) investor.

(B) returns to the market and finds an interested buyer- (C), who signs a contract whereby (C) the buyer accepts to purchase the property. To facilitate the deal, B approaches and obtains a hard money loan from the private lender and then funds the purchase contract with A, creating the first closing A-B.

(B) Investor then sells and signs the sale contract with (C) end buyer creating the second closing B-C.

B the investor repays the private money lender including fees and then keeps the difference between the double closings as their profit without ever touching their own funds.