Private and hard money lending often carries a stigma due to interest rates that appear high compared to traditional bank loans. However, according to H. Jack Miller, founder of Gelt Financial, a national private lender with nearly four decades of experience, the real cost of capital extends far beyond the interest rate on a loan document. Miller contends that borrowers who reject private capital based solely on a 12% rate frequently end up paying more through hidden costs or missed opportunities.
Miller identifies what he calls the “Tony Soprano perception” of private lending, where the industry is unfairly associated with loan sharking or desperate borrowers. “The reality is the exact opposite,” he says. “Our borrowers are so grateful to us. We’re coming through in four or five days when everyone else said no or told them to wait two months.” He points to Elon Musk as an example: the world’s wealthiest person does not borrow at 6% but raises capital through private equity and venture funding, where the cost—when factoring in equity surrendered—often exceeds 12%.
The true alternative to private capital, Miller argues, is often more expensive. He describes a common scenario where a local investor finds a property needing work but lacks cash. Instead of borrowing at 12% from a private lender, they bring in a family member who provides funding in exchange for half the profit. “That’s what people think of as the acceptable option,” Miller says. “But when you do the economics, giving up 50 percent of your profits is far more expensive than borrowing the money at 12 percent. And you have to deal with that person at every dinner table for the rest of your life.” The mistake, he emphasizes, is treating the interest rate as the total cost of capital without factoring in what the deal returns or what is surrendered for a lower nominal rate.
Gelt Financial survived the 2008 financial crisis, and Miller describes the aftermath as clarifying. “We went back through everything that went bad and asked where did we lose money, and where we didn’t. What we found was when we stayed disciplined, we didn’t lose a penny. Every single loss came from exceptions.” He draws a distinction between Gelt and newer entrants in the private lending market, most of which have never operated through a significant downturn. The discipline from surviving the Great Recession cannot be replicated through a good run of deals.
The structural shift in real estate financing is permanent, Miller believes. Banks have become more restrictive, with stricter regulatory requirements and longer approval timelines. Meanwhile, private capital has grown more sophisticated and accessible. For time-sensitive deals, bridge transactions, and borrowers whose profiles do not fit bank templates, private capital is increasingly the first call. “Sophisticated operators understand that if the deal works at the cost of capital, the cost of capital is not the problem.” Gelt Financial’s track record across hundreds of closed deals reflects that logic in practice: fast, flexible financing for borrowers who need to move quickly on deals that make sense numerically.
Gelt Financial LLC is a national private lender and distressed debt buyer with over 37 years of experience across commercial and investment real estate. Operating in 37 states, the company provides bridge financing, foreclosure bailout loans, and non-performing loan acquisitions for real estate investors, operators, and institutions. This article is intended for informational purposes only and does not constitute legal, financial, or investment advice.
