As the global private credit market continues to rapidly expand, with a projected growth of 1.67 trillion in 2025, there has never been a better time to partner with a private lending law firm. From direct and wholesale lenders, loan aggregators, institutional investors, and fund managers, forging a relationship with a private lending law firm provides you with a strategic edge and a firm foundation that ensures legal compliance and protection.
In the article below, we’ll cover exactly what you should expect when partnering with a private lending law firm.
Why Private Lenders Need Legal Counsel That Specializes
Private lending is a unique space within real estate finance, governed by a combination of state-specific laws, federal regulations, and practical deal-making strategies. Unlike traditional consumer mortgage lending, private lending often involves business-purpose loans, nuanced borrower relationships, and creative structuring.
A general business attorney may not fully grasp the complexities of loan documents, title issues, or regulatory compliance specific to private credit. That’s where a private lending law firm proves essential. These firms specialize in ensuring deals are structured properly, compliant with applicable laws, and insulated against litigation risk.
Services a Private Lending Law Firm Offers
A dedicated legal partner can streamline nearly every stage of the lending process:
1. Loan Document Drafting and Review
Custom-tailored loan documents are a must in private lending. Legal teams draft promissory notes, deeds of trust, loan agreements, personal guarantees, and other instruments aligned with your business model. These documents protect your interests and reduce exposure to disputes or borrower defaults. Most importantly, private lending attorneys must understand state or federal restrictions which may apply in the loan transaction such as maximum late charges, default interest rates, ability to pay referral fees, etc.
2. Licensing and Regulatory Compliance
Navigating the patchwork of state licensing laws is a challenge for lenders operating across jurisdictions. A private lending law firm ensures you meet licensing requirements, avoid violations, and remain up-to-date with state laws such as usury, late charges, prepayment penalties, and other loan level restrictions mixed in with a deep understanding of applicability of federal regulations ECOA, AML, BSA.
3. Fund Formation and Capital Structuring
For lenders managing pooled capital or launching a mortgage fund, legal guidance is crucial. Fund formation involves securities compliance, private placement memoranda (PPMs), investor disclosures, and subscription agreements, all of which must be crafted with precision. The risks of private credit mortgage funds is vastly different and the failure to hire experts who can properly disclose could create significant challenges and liability down the road with investors.
4. Foreclosures and Litigation Support
Should a borrower default, a firm experienced in judicial and non-judicial foreclosures can accelerate recovery. They also represent lenders in lawsuits involving fraud, breach of contract, or bankruptcy proceedings, ensuring your interests are zealously defended. Skilled counsel will be able to understand whether modification or forbearance is a better option to litigation.
5. Due Diligence and Title Review
Legal professionals help uncover red flags before they derail a deal. Whether through reviewing title reports, evaluating borrower corporate documents, or flagging zoning and environmental concerns. Waiting until the close the transaction to clean up title is too late creating a poor experience for the private lender borrower and delaying transaction close times in which speed of execution is critical.
Choosing the Right Law Firm
Not all private lending law firms are created equal. When selecting legal counsel, experience matters. A firm that understands your industry’s unique pace, language, and risks is far better equipped to support your growth. Look for attorneys with deep involvement in trade groups, real-world deal experience, and a clear understanding of lender priorities. Team size and depth matters, most private lending law firms are either firms which mainly close loans and do not understand capital markets, fund formation, and litigation strategies or they are firms with five or less attorneys that simply do not have the breadth and depth required by serious private lending organizations.
At Fortra Law, the entire organization is built around the representation of private lenders, giving them a deep understanding of the regulatory hurdles, transactional nuances, and litigation challenges unique to this space. With more than 20 private lending attorneys and a team of almost 100 private lending professionals, Fortra Law is by far the largest law firm in the country which specializes in the representation of private lending organizations from inception to maturation. With a team that regularly works with originators, fund managers, and institutional capital providers, Fortra brings practical, business-minded insight to every deal.
Unlocking the Full Potential of Your Business
With traditional banks pulling back, private lenders are stepping in to fill the financing gap, especially for small and mid-market borrowers. In 2023 alone, over $450 billion in new direct loans were issued globally, up 15% from the prior year. But with that opportunity comes risk: legal missteps in structuring, licensing, or enforcement can cost lenders dearly.
Looking to build a durable, compliant lending business? Contact the Fortra Law team today and let our experienced attorneys help you navigate the path to long-term success.
