Once viewed as a niche option, private lending has rapidly entered the mainstream as more borrowers discover the speed, flexibility, and accessibility of private credit financing. But as the industry attracts new borrowers, it is also evolving with their needs, particularly in the balance between short-term and long-term loans.

To understand where private lending is headed, it’s important to first understand what defines the industry and how the market has shifted from 2024 to 2025.

What is private lending (and why investors use it)

For real estate investors, speed and flexibility are paramount. Generally, private lenders can evaluate, approve, and fund loans far faster than traditional mortgage lenders, enabling investors to act quickly on deals, secure competitive financing, and execute strategies that might not fit conventional lending timelines or investor guidelines.

Within private lending, there are two primary product categories: short-term bridge loans and long-term DSCR loans.

Bridge loans: The traditional foundation

Bridge loans invert the traditional credit underwriting box: the property, not the borrower, is the primary qualifier. Unlike banks and conventional lenders that rely heavily on W-2 income, tax returns, and credit scores, private lenders primarily evaluate the value of the property, feasibility of the investment, and the exit strategy to determine whether to extend credit.

Bridge loans have historically served as the foundation of private lending. They are short-term (36 months or fewer but typically 6 to 24 months) and commonly used for:

· Fix and flip projects / Value-add improvements

· Ground-up construction or significant remodels including adding square footage

· Short-term holds while waiting for long-term financing, for example to reposition a commercial property during a transition between tenants

For purposes of this article, the term “bridge loans” will be used to refer to all of these short-term loan products. Industry vernacular varies significantly, many private lender originators will label these loans as Rehab Loans, Non-Owner, Residential Transition Loans (RTL), Hard Money, Ground Up, etc. These loans often feature interest-only payments and are designed to help borrowers move quickly, execute a strategy, and transition the property to a more permanent financing structure or sell it.

For many years, bridge loans represented the majority of private lending volume, and the vast majority of private lenders still focus primarily on this type of loan.

DSCR Loans: The long-term product reshaping the market

The Debt Service Coverage Ratio (DSCR) loan has become the fastest-growing product in the private lending space. DSCR loans are typically 30-year loans secured by rental properties underwritten primarily on the property’s cash flow rather than the borrower’s income.

DSCR = Net Operating Income/Total Debt Service

Their appeal is straightforward:

· Predictable long-term payments

· Minimal borrower income documentation

· Scalable financing for portfolio investors

· Loans made to entities rather than individuals which most real estate investors prefer

· Portfolio/cross collateralization allowing a single refinancing across multiple properties

· Typically fixed interest rates and generally less than 100bps more than conventional owner occupied financing

While most lenders still focus on bridge loans, those specializing in DSCR financing are generating significantly higher loan volumes and showing strong growth, signaling a broader shift in investor strategy.

2024: Growth and an early shift

According to third-party private lending data aggregator Forecasa¹, total private loan volume grew from 241,701 loans in 2023 to 276,909 in 2024, reflecting 14% year-over-year growth.

Data from Lightning Docs² showed that approximately 60% of loans in 2023 were bridge loans. In 2024, bridge loans accounted for 54% of loans generated on the platform. While bridge loans still served as the central product offering, DSCR loans were steadily gaining traction.

2025: The shift toward long-term lending

In 2025, the trend became unmistakable. Lightning Docs’ loan data shows that bridge loans have dropped below 47% of year-to-date volume, meaning that for the first time DSCR loans now make up the majority of loans generated on the platform.

Several factors have contributed:

· Securitization of loans, enabling lenders to deploy DSCR capital faster

· Strong rental demand in key regions

· Stabilized long-term interest rates encouraging 30-year financing

· The movement of many large independent mortgage bankers to focus on the product because homeowners have a lock in effect hampering refinance opportunities

The result is a private lending landscape where DSCR loans, once the emerging product, are now driving substantial growth, even with most lenders continuing to primarily offer bridge loans.

Lightning Docs tracked 170 private lender loan originators in 2024 and 2025. Bridge loan volumes increased 27% year over year through November 2025 (from 16,977 loans to 21,865).

However, when tracking 42 DSCR loan originators, their volumes increased an astounding 94% year-over-year through November 2025 (from 15,009 loans to 29,066).

What this shift means going forward

Private lenders have always carved out their place in the market by meeting borrowers where traditional lenders cannot. Flexibility has long been the defining feature of the industry, building products that match the realities of how investors actually operate. The rapid rise of DSCR lending is the latest example of that. As demand shifted toward long-term rental strategies, private lenders responded with a product tailored to that need, reinforcing the industry’s foundational purpose of adapting to evolving market demands.

The lenders who leaned into DSCR programs early are now seeing some of the strongest growth, often generating significantly higher loan volumes than lenders who remain focused primarily on bridge loans. It’s a clear signal that private lenders who continue to evolve alongside investor demand will scale the fastest.

As the industry moves forward, the market is becoming more balanced, with both short-term bridge loans and long-term DSCR loans playing essential roles. For borrowers, this broadens the financing options available across the full lifecycle of a property. For lenders, it underscores the value of offering diversified loan programs that support a variety of investment strategies.

Nema Daghbandan is the Founder and CEO of Lightning Docs.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: [email protected].

Sources:
¹ https://www.forecasa.com
² https://lightningdocs.ai