A lender financing program where a lender provides financing that is secured by an existing loan.
A lender has originated $10 million worth of loans to real estate investors. To raise additional capital for future lending without selling the loans, the lender seeks a note-on-note financing arrangement. They pledge these $10 million in existing loans as collateral for a $5 million loan from an institutional investor. The lender now has $5 million in capital to lend to new borrowers while retaining the interest payments from the original loans.