Eligibility criteria
Eligibility criteria are the rules a loan must meet to count toward a credit facility’s borrowing base or to be bought by an investor, such as loan type, lien position, LTV, size, location and age.
How eligibility criteria work
Every warehouse line, credit facility and loan purchase program defines which loans qualify. The Comptroller of the Currency’s asset-based lending handbook explains that collateral that does not meet the agreement’s criteria stays in the lender’s collateral pool “but does not qualify for inclusion in the borrowing base.”
Typical criteria for loan-backed facilities include first-lien position, business purpose, maximum loan-to-value and loan-to-cost, loan size limits, eligible property types and states, borrower experience and credit, current payment status and a maximum time on the line. Programs can exclude whole categories: one bank’s published warehouse program lists construction and bridge loans as ineligible products.
Why it matters to a private lender
Eligibility, not the headline commitment, decides what you can fund. Before signing, run your last twelve months of loans through the criteria and see what share would have qualified. Watch for criteria that can change during the term at the provider’s discretion.
Example
Hypothetical. A lender’s pipeline is 40% bridge, 30% fix-and-flip, 20% ground-up construction and 10% DSCR rental. A line that excludes construction and caps LTV at 70% might accept only about half of it.
Capital partners also set criteria, but each loan is placed only with partners whose criteria it fits. Learn what they look for in the lender due diligence checklist.
Sources
- Office of the Comptroller of the Currency, Comptroller’s Handbook: Asset-Based Lending (borrowing base, eligibility, concentration limits, availability sub-limits)
- Simmons Bank, Warehouse Lending (an example bank program: eligible and ineligible products, personal guarantees from 10% owners, per-file fees)
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.