Non-Arms-Length Financing: Unlocking Tailored Lending Solutions
Non-arms-length transactions, where the parties involved share a close relationship, often present challenges in traditional lending environments. Whether it’s family members purchasing property from one another or business partners requiring inter-company loans, these transactions typically fall outside the standard lending parameters of traditional financial institutions. However, private lending offers the flexibility needed to meet these unique circumstances.
The Role of Private Lending in Non-Arms-Length Transactions
Private lending stands out due to its adaptability and focus on individualized solutions. Unlike traditional lenders, private lenders assess each case on its merits, enabling tailored financing for clients navigating non-arms-length deals. These transactions may include scenarios such as:
Parents selling property to children.
Business owners transferring assets between related companies.
Transactions involving shared ownership or familial agreements.
Private lenders can provide creative structures that support the borrower’s goals while managing risk effectively.
Case Study: A Family Property in Fredericton, NB
Situation
A property in Fredericton, New Brunswick, appraised at $380,000, was held in an estate. The estate agreed to sell the property to the daughter for $225,000—a significant discount to market value.
Keystone’s Solution
We structured financing based on 65% of the appraised value ($247,000). This approach:
Fully covered the $225,000 purchase price.
Provided additional funds for legal fees and minor upgrades.
Ensured the daughter could transfer title and establish ownership.
The Result
With our tailored financing, the property seamlessly changed hands. The daughter now holds title and can refinance with a traditional lender to pay off the private loan, setting her up for long-term success.
Why Non-Arms-Length Transactions Work with Private Lending
Traditional lenders often shy away from non-arms-length transactions due to perceived risks and regulatory constraints. Private lending, by contrast, excels in:
Flexibility: Each deal is reviewed on a case-by-case basis, allowing for tailored solutions.
Speed: Private lenders can act quickly, ensuring financing is secured within tight timelines.
Creative Structuring: With options like appraised value-based lending, private lenders can address unique needs efficiently.
Conclusion
Non-arms-length transactions don’t have to be a roadblock to achieving financial goals. Private lending provides the flexibility and creativity required to navigate these complex deals, offering solutions that traditional lenders often cannot. Whether it’s bridging the gap between transactions or structuring loans to align with unique relationships, private lending is a powerful tool for those with specific, short-term financing needs.
Contact us today to learn more about financing beyond the acquisition price.
