Financial Glossary
Balance Sheet Lender
A balance sheet lender is a lender that originates loans using its own capital and retains those loans as assets on its balance sheet, rather than selling them to secondary-market investors or securitizing them. Because the lender bears the credit risk for the life of the loan, it underwrites based on its own standards and earns income from interest over time. Banks, credit unions, and many private real estate lenders operate this way.
Problem & Application
Real estate investors and owner-operated borrowers often encounter balance sheet lenders when seeking financing that doesn't fit conforming guidelines, such as DSCR loans on rental property, bridge financing, or loans on campgrounds and mixed-use assets. These lenders can offer more flexible terms because they aren't bound by an investor's purchase criteria, but they may price in the added risk they hold. Understanding whether your lender keeps the loan or sells it helps you anticipate flexibility, pricing, and how servicing will be handled.
In Short
Knowing whether you're borrowing from a balance sheet lender clarifies how flexible underwriting will be and who ultimately holds your loan. It is a key factor when financing non-standard or income-producing property.