Everything You Need to Know About Table Funding

In the world of real estate and private lending, table funding is an essential process that helps brokers close deals quickly and efficiently. If you're new to the concept or simply looking to better understand how it works, this blog will cover everything you need to know about table funding — from the basics to its benefits and potential challenges.

What is Table Funding?

Table funding is a process where a lender provides the funds to close a loan, but the loan is technically originated by a different entity, such as a mortgage broker or correspondent lender. In this arrangement, the lender purchases the loan at the time of closing, effectively “funding” the deal. This allows brokers to facilitate loans without needing to be the actual lender, creating an opportunity for them to act as intermediaries while still earning compensation.

How Does Table Funding Work?

In a typical table funding scenario, the process works as follows:

Loan Origination: A broker or correspondent lender originates the loan by working directly with the borrower. They process the loan application, collect necessary documentation, and ensure that all criteria are met.
Loan Approval: After the loan is approved, the broker or correspondent lender seeks a funding partner, usually a private lender or financial institution, to provide the necessary capital.
Table Funding: On the day of the loan closing, the lender provides the funds directly to the borrower. At the same time, the broker or correspondent lender sells the loan to the funding partner. This transaction typically happens “at the table,” hence the name "table funding."
Transfer of Ownership: Once the funds are disbursed, the lender assumes ownership of the loan, and the borrower begins making payments directly to the lender. The broker or correspondent lender typically earns a fee for facilitating the loan but does not assume long-term responsibility for it.

Who Benefits from Table Funding?

Table funding benefits multiple parties in the lending and real estate industries. Here’s a breakdown of who benefits and how:

Mortgage Brokers: Brokers can offer loan products to clients without needing to fund the loan themselves. By partnering with a lender, they can provide a wide range of options while earning commissions and fees. This allows brokers to focus on originating loans and working with clients, rather than managing the financial risks associated with funding.
Lenders: For lenders, table funding provides an efficient way to acquire loans quickly. They can expand their portfolio without taking on the burden of originating loans themselves. Lenders can also increase their deal flow by working with multiple brokers and correspondent lenders.
Borrowers: Borrowers benefit from table funding because they get the loan they need with minimal delays. In many cases, table funding allows for quicker closings compared to traditional lending methods. It also gives borrowers access to a broader range of loan products, as brokers are often able to shop around with various lenders to find the best terms.
Real Estate Investors: Real estate investors looking for bridge loans, DSCR loans, or other specialized financing options can leverage table funding as a way to quickly close on investment properties. With the ability to fund loans swiftly, table funding allows for fast acquisitions and more investment opportunities.

Advantages of Table Funding

Faster Closings: One of the biggest advantages of table funding is the speed at which deals can close. Since the lender is providing the funds directly at the closing table, the process can be completed much quicker than traditional funding methods.
Expanded Product Offerings: Brokers who use table funding can offer a wider variety of loan products to their clients. This is because brokers can partner with different lenders and bring in the best options to meet their clients’ specific needs.
Lower Risk for Brokers: Because the broker is not taking on the financial risk of funding the loan themselves, they can focus on origination without worrying about funding requirements or servicing the loan.
Increased Flexibility: Table funding can be especially useful for investors or borrowers who need short-term financing solutions like bridge loans or fix-and-flip loans. Lenders often provide more flexible terms for table-funded loans, making them ideal for investors seeking fast capital.
Access to More Capital: Table funding allows brokers and lenders to work together to provide more loans and access larger sums of capital. It’s a mutually beneficial arrangement that increases the availability of funds for borrowers.

Potential Challenges of Table Funding

Compliance and Regulations: While table funding is legal, it must be done in accordance with all state and federal lending laws. Brokers must ensure they are following all regulations to avoid legal issues. Lenders and brokers should both be vigilant about compliance with licensing, disclosures, and other requirements.
Dependence on Lender Relationships: Brokers rely on their relationships with lenders to ensure the success of the table funding process. If a broker does not have strong relationships with trusted funding partners, they may struggle to find reliable lenders to fund loans.
Limited Control for Brokers: Even though brokers are handling the origination process, they still have limited control over the final decision. The lender ultimately decides whether or not to fund the loan, and this can sometimes lead to delays or rejections that brokers have no influence over.
Funding Fees: While table funding allows brokers to earn fees, the cost of doing business with a lender may result in higher fees for borrowers. Lenders often factor in the costs of purchasing loans into their rates and terms, which could result in higher costs for the borrower.

When Should You Consider Table Funding?

Table funding is an excellent option for brokers who want to expand their business without taking on the risks of loan funding themselves. It’s also beneficial for borrowers who need quick funding for investment purposes, like real estate purchases or property renovations. Additionally, table funding works well for lenders looking to diversify their portfolio by acquiring loans from multiple brokers.

Table funding offers an efficient, flexible, and fast way to fund loans, benefiting brokers, lenders, and borrowers alike. By streamlining the loan process, table funding allows brokers to offer more products, close deals faster, and mitigate financial risks. For lenders, it provides a quick way to expand their portfolio, and for borrowers, it means quicker access to the capital needed for real estate transactions. However, to make the most of table funding, it’s essential for all parties involved to maintain strong relationships, stay compliant with regulations, and be clear on the terms of the agreement. Whether you're a broker, investor, or lender, table funding is an effective tool to consider in your real estate strategy.