Gap Funding
Gap funding bridges the difference when a traditional or senior lender’s loan-to-value (LTV) or loan-to-cost (LTC) limits do not cover 100% of the capital needed for an acquisition or construction project. By providing this supplementary layer of financing, gap funding ensures real estate investors and developers can successfully close transactions and complete projects without being stalled by unexpected cash shortages.
Deficit Coverage: Bridges the financial shortfall between the total project costs (purchase and rehab) and the maximum loan amount provided by a primary lender or hard money source.
Higher Leverage Solutions: Allows real estate investors to minimize or entirely eliminate out-of-pocket cash contributions by borrowing up to 100% of the combined acquisition and construction costs.
Secondary Collateral Position: Typically structured as a secondary lien or unsecured promissory note, carrying higher interest rates and shorter terms to reflect the elevated risk assumed by the secondary lender.