Financial Glossary
Transactional funding
Transactional funding is an ultra-short-term loan -- typically covering 24 to 48 hours -- that enables a buyer to close the acquisition of a property using the lender's capital before simultaneously reselling it to an end buyer, repaying the loan from the sale proceeds at the second closing. It is most common in real estate wholesaling, where an investor contracts to buy a property below market and assigns or double-closes the deal to an end buyer for a higher price. The lender charges a flat fee or a percentage of the loan amount rather than an amortizing interest rate, reflecting the very brief holding period.
Problem & Application
A real estate wholesaler contracts to buy a distressed single-family property for $180,000. The wholesaler simultaneously negotiates a contract to sell the property to a rehabber for $205,000, creating a $25,000 gross margin. The wholesaler's title company requires a simultaneous double-close rather than a simple assignment. To fund the A-to-B purchase without using personal capital, the wholesaler secures transactional funding at a 1.5% fee on the $180,000 loan, costing $2,700. The B-to-C sale closes on the same day, the lender is repaid $182,700 from the proceeds, and the wholesaler nets approximately $22,300 before closing costs. The critical risk is settlement timing: if the end buyer's financing falls through and the B closing does not occur on the same day, the transactional lender's capital is exposed and the borrower may face penalties or a forced sale. Transactional funding is therefore only appropriate when the end buyer's financing is fully underwritten and closing is highly certain.
In Short
Transactional funding offers real estate investors the flexibility to complete quick-turnaround deals. By utilizing this funding method, investors can seize profitable opportunities without significant capital outlay upfront.
How it works
Pricing is typically structured as a flat fee or a percentage of the loan principal (commonly 1% to 3%, often with a stated minimum dollar amount), not an annualized interest rate, because the money is outstanding for only hours. The defining requirement is a bona fide, ready-to-close end buyer (the "C" party) on the same day or within a day or two; without that committed exit, the loan is not approved. A frequent misunderstanding is that transactional funding is a financing source for fix-and-flip or buy-and-hold deals — it is not, because there is no holding period and the lender expects repayment from a simultaneous resale, not from rents, a refinance, or a future sale.
Double-closing a roadside RV park parcel
An investor contracts to buy a small, underused RV park lot from a motivated seller for $320,000. Before closing, she signs a separate contract to resell it to a campground operator expanding next door for $360,000, a $40,000 spread. Because the operator's lender requires clean title from the investor rather than an assignment, she needs a same-day double close. She arranges transactional funding at a 2% fee on the $320,000 A-to-B purchase, costing $6,400. On closing day, the funder wires $320,000 to fund the A-to-B leg; minutes later the B-to-C sale to the operator closes for $360,000. From those proceeds the funder is repaid $326,400 ($320,000 principal plus the $6,400 fee). After roughly $3,600 in title, recording, and settlement costs across both closings, the investor nets about $30,000 without using her own capital or holding the property overnight.
Frequently asked
How is transactional funding different from a hard money loan?
A hard money loan funds a holding period — weeks to months — while you renovate or refinance, and it charges monthly interest plus points secured by the property. Transactional funding covers only same-day or 24-to-48-hour double closings, charges a one-time flat fee or percentage instead of ongoing interest, and is repaid immediately from a simultaneous resale to a committed end buyer.
Do you need good credit or income to get transactional funding?
Usually no. Because the loan is repaid within hours from the resale proceeds, most transactional lenders do not require credit checks, income verification, or appraisals the way conventional lenders do. Their main requirement is proof of a bona fide, ready-to-close end buyer with funds in place. No verified exit buyer typically means no approval, regardless of your credit.
What does transactional funding cost?
Costs are typically a flat fee or a percentage of the loan amount, commonly around 1% to 3% of the funded purchase price, often subject to a minimum dollar charge (frequently several hundred to a few thousand dollars). On a $200,000 purchase at 2%, the fee would be $4,000. You also pay standard title, escrow, and recording costs on both closings, separate from the funder's fee.