Here is a nice summary of the different types of Commercial Finance Lenders that are available to fund Commercial Loan requests:
Portfolio Lenders: Portfolio lenders make commercial mortgages with the intention of retaining the generated asset as part of the company’s portfolio. The two most common types of portfolio lenders are commercial banks and life insurance companies; but this category also includes such entities as pension funds, REITs, and savings and investment funds.
Conduit Lenders: A relative new-comer to the lender pool, conduit lenders have become dominant in several areas of commercial finance since the mid ’80s . Loans that the conduit originates become part of a standardized pool of such assets, shares of which are then sold to investors. The conduit lender may service the loan, but the interest payments are collected on behalf of the investors.
Sub-Prime Lenders may be owned by banks, and the notes they generate may sometimes also be securitzed; so the distinction between this type of lender and those above is not due to the source funds or the use of the lender’s asset, but simply the circumstances under which the lender will make a loan: sub prime lenders specialize in making loans to people whose low credit scores prevent them from obtaining financing through conventional commercial mortgage lenders.
Private Investors and Funds: A more diverse and fluid category of lenders includes so-called “Private” or “Hard Money” lenders. The main distinctions between these types of lenders and the above “institutional” lenders are: (i) that the loaned funds generally come from a private individual or a group of private individuals, rather than from a company’s assets, and (ii) that private lenders are willing to take on loans with higher levels of risk and even profound irregularities in return for a higher return on the investment. Private investors are generally even more flexible than sub prime lenders when it comes to property condition and borrower qualifications.
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