What kind of loans do private loan companies typically focus on?

Private loan companies typically focus on junior loans, which are loans secured by a property that is subordinate to a first mortgage. This means that if the borrower defaults on the property, the first mortgage must be paid off before the junior loan is repaid. Because junior loans pose a higher risk to lenders due to this subordinate position, private loan companies, often characterized by a willingness to take on more risk, are more likely to provide these types of loans.

In contrast, senior loans are typically provided by banks and financial institutions, as these loans take priority over other forms of financing. Conventional loans are standard mortgages offered by various lenders that meet specific guidelines, while government loans are backed by government agencies and have distinct eligibility criteria. Therefore, junior loans are more aligned with the risk tolerance and business model of private loan companies.