Public Lenders Versus Private Lenders — How Are They Different?

approved loan letter slipped in mailbox

Public Lenders Versus Private Lenders — How Are They Different?

When someone needs working capital for their small business or seed money for their next business venture, they have to choose between using a public lender or a private lender to work with for a working capital loan.

Here at the Hedaya Capital Group, we obviously have a horse in the race, being a private lender, and all — but it is important to note that in the end, it is your unique financial situation that will determine if a contract with a public lender or a private lender, such as ourselves, is the right decision for you and your business venture.

In today’s blog post we will very briefly discuss some of the fundamental differences between public lenders and private lenders so that you, as a business owner, can make a more educated decision as to what style of borrowing that you select. Continue reading to learn more and please don’t hesitate to contact us if you have any questions about whether public lending might work for you.

Finding The Lender

When you need working capital of your business or your next big project, you will likely scour the web for financial terms like “lending near me,” “small business lending,” and more. The only problem with that is that you are likely to get more results than you really need. In fact, it can even be a little confusing, as both public lenders and private lenders can go by a number of different titles. To make it a little easier, we have listed the titles below:

Public Lenders

  • Agents
  • Brokers
  • Loan officers

Private Lenders

  • Brokers
  • Loan brokers
  • Private money lenders

Ideal Borrowers

When it comes to lending, private and public lenders won’t just give capital loans to anyone. In fact, public and private lenders are known to approve very different types of people. Public lenders, like banks, are pretty simple. Their ideal borrower is a person who has good credit and documented income history that shows there is a minimal risk of default.

Private lenders, on the other hand, are not so cookie cutter in the way that they evaluate and approve their borrowers. A private lender looks at the potential borrower’s credit, character, capacity, collateral, and the conditions of the potential loan before approving prospective borrowers.


As with any business, there are financial protections, standards, and guidelines that a lender must follow. Public lenders are much more regulated than private lenders — having to follow standards set by governing agencies like Fannie Mae, Freddie Mac, FHA, VA, and the USDA, just to name a few.

Private lenders, however, do not have to follow set standards due to the unique nature and guidelines that are determined by the unique situation and the nature of the investment planned by the borrower. Having fewer guidelines allows private lenders to approve and issue small business loans and capital loans to their borrowers faster.


As a business owner or a person who is planning to launch a new business venture, each and every cent counts. That’s why it is important to also consider the interest rate of your small business loan or working capital loan.

Public lenders are privy to competitive rates at the time of the loan approval because as lenders providing a fairly average distribution of loan-types to large populations of people, they must standardize the interest rates that they offer to some degree.

Private lenders, however, will vary the interest rates that they offer to prospective borrowers depending on the volatility of the business venture and the venture’s likelihood of success or default.


Collateral is the assets that you offer as security in the event that you default on your loan. Collateral guidelines are where public lenders and private lenders differ most, as they operate on almost opposite standards. It is also important to note that collateral practices and standards might vary from practice to practice.

Public lenders almost always require that the prospective borrower puts up collateral that is relevant to the business loan or capital loan itself, while private lenders do not. Instead, private lenders may accept collateral in a form that is unrelated to the subject of the loan.


Another fundamental difference between public and private lenders is the importance that they place on credit when they are deciding whether or not to approve someone for a working capital loan. Public lenders tend to place a high value on credit in the decision-making process, while private lenders do not.

That does not go to say that private lenders do not factor credit into their decision — because they do — but a private lender might still approve an application for a small business loan or a working capital loan depending on the unique situation of the investment.

For Business Lending Inquiries Contact Us Today

Are you interested in kickstarting your small business or your latest business venture? If so, we highly recommend that you get in touch with our team, here at the Hedaya Capital Group, today.

Providing the New York City area with services like credit protection, factoring, accounts receivable, working capital, and trade/import financing, our private lending team is here to help you get the working capital that you need to succeed.

Contact us today and speak to a member of our team. We look forward to helping your dreams, your business, or your business venture succeed.

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