Private lenders are individuals or companies which specialize in the provision of credit to other parties, despite not being traditional financial institutions such as banks. Private lenders exist to serve individuals or companies which for some reason cannot get loans from the traditional sources. An example of this is when they have a poor credit score. In such cases, the private lenders step in to provide the credit usually at a higher interest rate than usual.
Being a private lender is not synonymous with being a loan shark. While many loan sharks are not legally allowed to carry such businesses, private lenders in the United States are supposed to be registered firms. In addition to that, they are expected to comply with usury laws at both the state and federal level, and are also not exempt from banking laws.
This means that if you have some money and are interested in starting a private lender business due to the high demand, it would be wise to first go through the legal requirements that are expected of such firms. In addition to that, the policies that such firms work with are usually expected to be in line with local and federal laws as well.
Private lenders are more likely to use legal means to recover money from clients who have defaulted. They therefore partner with attorneys who specialize in business law in order to make such processes fast, and can maximize the chances of a favorable resolution.