Financing

How transactional lenders get paid, and what they care about

Transactional lenders make their money by charging a flat fee, points, or a percentage of the loan amount for their short-term funding. They are primarily concerned with the strength of your A-B and B-C contracts, ensuring a quick, simultaneous closing.

October 8, 2026 · 4 min read

What is transactional funding?

Transactional funding is a short-term loan specifically for a double close, where you buy a property from a seller (A-B transaction) and immediately sell it to a cash buyer (B-C transaction). The lender funds your A-B purchase for a very brief period, often just a few hours or a day, before your B-C sale closes.

The purpose is to allow an investor to close on a property without using his or her own funds or traditional financing. This means you do not need to show proof of funds for the A-B transaction, as the transactional lender provides it. It is not legal, financial, or tax advice; consult professionals for specific guidance.

This type of funding is distinct from hard money or private money because of its extremely short term and specific use case. It is designed to bridge the gap between two simultaneous closings, making it ideal for wholesale deals structured as a double close.

How transactional lenders make their money

Transactional lenders earn income by charging a fee for their service. This fee can be structured in several ways, most commonly as a flat fee, a percentage of the loan amount, or points.

For example, a lender might charge a flat fee of, say, a hypothetical $1,500, or a percentage like 1% to 3% of the amount borrowed. This fee is typically paid at the closing of the B-C transaction, so it comes directly out of your proceeds.

Because the loan term is so short, the fees might seem high relative to the time, but they cover the lender’s risk and administrative costs. The fee is the primary way transactional lenders get paid, as there's usually no interest accrual over such a short period.

What transactional lenders look for in a deal

Transactional lenders are less concerned with your credit score or personal financial history than traditional lenders. Their primary focus is on the strength and certainty of the two transactions, especially the B-C leg.

They need to see a solid A-B purchase agreement and, crucially, a firm B-C contract with a cash buyer. The B-C contract must demonstrate a clear profit spread for you and a buyer who is ready to close quickly.

The lender will also review the property's title to ensure there are no unexpected clouds or liens that could delay the B-C closing. The speed and certainty of the exit strategy for the B-C transaction are paramount for the transactional lender.

The closing process with transactional funding

The process typically involves simultaneous closings. First, you, as the investor, close on the A-B transaction with the transactional lender's funds. Immediately after, or sometimes even at the same title company table, the B-C transaction closes.

The funds from the B-C buyer are then used to repay the transactional lender the original loan amount plus their fee. Any remaining profit is disbursed to you. This entire sequence usually happens within the same day.

Coordination with a title company experienced in double closings and transactional funding is essential. The title company acts as an impartial third party, ensuring all funds are properly disbursed and titles transferred correctly.

Risks and considerations for transactional funding

While transactional funding makes double closes possible, there are risks. The biggest risk is if the B-C buyer backs out. If this happens, you are still obligated on the A-B contract and would need to find alternative funding or a new buyer very quickly.

Another consideration is the fee structure. While generally clear, ensure you understand all associated costs upfront. Confirm there are no hidden fees or penalties if the closing is delayed slightly, though delays are generally frowned upon.

Always work with reputable transactional lenders and title companies who have a track record with this specific type of funding. This is not financial advice, and you should perform your own due diligence.

Important disclosure

This information is for educational purposes only and is not intended as legal, financial, or tax advice. Real estate transactions involve significant risks, and specific situations may vary. Always consult with qualified legal, financial, and tax professionals before making any investment decisions. The specifics of transactional funding can depend on local laws, regulations, and the policies of individual lenders and title companies.

Questions people ask

Can I use transactional funding for a long closing?

No, transactional funding is explicitly for very short-term, simultaneous closings, typically just a few hours or a single day. If you need funds for more than a day, you're looking at hard money or private money, which have different terms and fees.

Do transactional lenders check my credit?

Generally, no. Transactional lenders focus almost entirely on the deal itself: the contracts, the property's marketability, and the certainty of the B-C buyer. Your personal credit score is usually not a factor in their decision.

What if my B-C buyer backs out?

If your B-C buyer backs out, you are in a difficult spot because you are still obligated to buy the property from the A-B seller. You would need to immediately find another cash buyer or secure alternative funding, or risk losing your earnest money and potentially facing legal action from the A-B seller.