Private and hard money lending often carries a stigma, largely due to the interest rate. When a borrower sees 12 percent and compares it to a bank quote of six, the choice seems obvious. But according to Gelt Financial, a national private lender with nearly four decades in the market, the real cost of capital extends beyond the interest rate, and borrowers who walk away from private capital because of the rate frequently end up paying more in unaccounted ways.
H. Jack Miller, who founded Gelt in 1989 and has been underwriting real estate deals since, has spent years making this case. The number that appears expensive is often the number that makes the deal possible at all. Miller calls it the Tony Soprano perception: private capital sounds like loan sharking, reserved for those with no other options. “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.”
Miller points to Elon Musk as an example. The wealthiest person in the world does not borrow at six percent; he raises capital through private equity and venture funding. When factoring in the equity stake surrendered, that capital costs more than 12 percent—it just does not look like a loan. Miller tells a common story: a local investor finds a property needing work but lacks cash. Instead of borrowing at 12 percent from a private lender, they bring in a family member who puts up the money 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 argues, is treating the interest rate as the total cost of capital without factoring in what the deal actually returns or what is given up to access money at a lower nominal rate. Gelt went through the 2008 financial crisis like every other lender, facing hundreds of defaults. 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 clear distinction between Gelt and newer entrants in the private lending market, most of which launched in the last decade and have never operated through a significant downturn. The discipline from surviving the Great Recession cannot be replicated through a good run of deals. Banks have become more restrictive, regulatory requirements stricter, and approval timelines longer. Meanwhile, private capital has grown more sophisticated and accessible. Miller believes the shift is permanent: private capital used to be a last resort, but for time-sensitive deals, bridge transactions, and non-traditional borrowers, it 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’s track record across hundreds of closed deals reflects that logic in practice.
