Private real estate lending has changed dramatically over the past decade. It began as a relationship-based industry led by local hard money lenders, and over time, crowdfunding platforms expanded access to capital and opened new ways to fund projects.
However, crowdfunding also created challenges during market swings, which is why today institutional lending is shaping the market with more consistent funding. At Groundfloor Lending, we experienced each step of this change. We chose institutional capital to give real estate investors stronger and more reliable financing.
After several years in crowdfunding, we transitioned into institutional lending through bond issuances. We raised $75 million in December 2024 and another $82 million in May 2025. Our goal was to provide stability for investors who rely on private real estate loans to complete long-term projects.
The Crowdfunding Era: Innovation with Limits
How Crowdfunding Changed Real Estate Finance
Crowdfunding opened real estate finance to more investors. Instead of depending on wealthy individuals or small lenders, platforms pooled money from thousands of people.
Borrowers gained clear benefits. They accessed larger pools of capital, flexible underwriting, and competitive rates when real estate markets were strong. For many real estate investors, crowdfunding created their first chance to take on more than one property at a time.
The Market Swing Challenge
Crowdfunding also created risks during market swings. Retail investors often reacted emotionally to headlines. If confidence dropped, funding could disappear quickly.
For example, a borrower might start a fix-and-flip project with a fully subscribed loan. Midway through construction, a negative news cycle could trigger withdrawals, leaving the project short on capital.
This caused three problems: Project timelines became uncertain, capital dried up when investors needed it most, and some projects even faced delays after construction had already started.
These patterns showed us that crowdfunding improved access. But it could not provide the steady foundation investors needed for long-term strategies.
Institutional Lending: Stability and Growth
What Makes Institutional Capital Different
Institutional lending raises money from pension funds, insurance companies, and asset managers. These investors commit funds through bonds and other credit products.
Institutional capital has advantages. It brings long-term commitments, professional risk analysis, larger deal sizes, and predictable funding schedules. Institutions follow strategies developed over time, not daily headlines.
The Bond-Funded Model in Practice
When Groundfloor Lending issues bonds, we package real estate loans into pools and sell them as securities. This process creates steady funding and spreads risk across multiple relationships.
For us, bonds provide immediate access to capital and predictable cost of capital. They also give us the ability to grow lending operations.
Borrowers benefit in several ways. They get faster draw schedules, reliable funding regardless of market news, competitive pricing, and access to larger loans.
The lending process for clients remains the same. Borrowers still work directly with our team and receive personal service. However, behind the scenes, institutional backing ensures that funds remain available in every market cycle.
Why We Shifted
Lessons from Market Swings
We moved to institutional lending based on real experience. During unstable periods, crowdfunding platforms struggled to keep projects funded. Institutional investors continued to provide consistent capital.
In December 2024, property values were unstable and retail investor confidence was low. Even then, we raised $75 million through bonds. Institutional investors viewed our loan pool as a safe, asset-backed opportunity. This showed us that institutional capital could support projects even in uncertain times.
The Ability to Grow
Crowdfunding platforms must constantly attract new retail investors to meet loan demand. Institutional lending removes this challenge. A single bond issuance can support hundreds of loans.
Our May 2025 bond of $82 million gave us immediate capacity to serve many more borrowers. This growth reduces delays and speeds up approvals. It also lowers costs, which we pass on to borrowers through competitive loan terms.
Crowdfunding vs. Institutional Lending
Capital Stability
The biggest difference between crowdfunding and institutional lending is how each reacts under pressure. Crowdfunding depends on ongoing investor participation. If confidence drops, capital often disappears.
Institutional lending avoids this problem. Once institutions commit funds, capital remains available for the full term. Borrowers benefit from reliable access, even when markets shift.
Borrower Impact
Closing speed also differs. Crowdfunding depends on how fast investors subscribe to deals. Institutional lending depends only on underwriting, so approvals move faster.
Investors also change draw schedules in crowdfunding if they hesitate. Institutional lenders guarantee draws once borrowers meet loan conditions. Crowdfunding platforms often limit lending by geography, while institutional lending works across all licensed markets.
For real estate investors, these differences mean greater confidence in timelines, easier planning, and fewer project risks.
The Future of Private Real Estate Lending
Technology Integration
Institutional lending uses the same technology that made private real estate lending appealing. Our bond-funded platform supports online applications, electronic signatures, real-time draw requests, and automated updates.
By combining stable capital with modern technology, we deliver both speed and reliability. This creates an advantage that traditional lenders and crowdfunding platforms cannot match.
Expanded Product Development
Institutional capital also supports new products for real estate investment strategies. Today we fund fix-and-flip, bridge, new construction, and DSCR loans.
With institutional backing, we can explore advanced products such as bridge-to-permanent loans, portfolio-level credit facilities, and development-to-stabilization financing. These options require large commitments and expert risk management. They are difficult in crowdfunding but natural in institutional lending.
Preparing to Work with Institutional Lenders
Institutional lending requires preparation. Borrowers should provide full budgets, timelines, valuations, contractor scopes, and exit strategies.
Lenders often require reserves of 10–15% of the project budget. Strong credit scores and diverse contractor relationships also increase approval odds. Presenting multiple exit strategies shows lenders that borrowers are ready for different outcomes.
Frequently Asked Questions
What is the key difference between crowdfunding and institutional lending?
Crowdfunding depends on many small investors whose decisions often change with market news. Large investors provide long-term commitments that form the base of institutional lending.
Why is institutional lending better for real estate investors?
Institutional capital provides steady funding, faster draws, and predictable approvals. This allows real estate investors to take on larger projects and scale with confidence, even when markets shift.
Do institutional lenders still fund common products like fix-and-flip loans?
Yes. Institutional lenders fund fix-and-flip loans, DSCR loans, bridge loans, and construction loans.
What do borrowers need to qualify for institutional lending?
Borrowers should prepare budgets, valuations, and exit strategies. Lenders might require reserves of 10–15% of the project budget. Strong credit profiles and contractor diversity also help secure approval.
How does technology improve the lending process?
Institutional lenders use online tools to make the process faster. Digital applications, electronic signatures, and real-time draw tracking keep projects moving smoothly.
The Strategic Advantage of Institutional Lending
The choice between crowdfunding and institutional lending is about more than where funding comes from. It is about building a reliable base for long-term real estate finance.
Groundfloor Lending’s move to institutional capital through bond issuances reflects this commitment. Institutional lending gives investors the ability to grow portfolios and plan multi-year projects. It also helps them keep moving forward during market swings.
While crowdfunding expanded access to private real estate lending, institutional lending provides the stability that serious investors need. Our $157 million in bond offerings prove that this model delivers consistent results.
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September 17, 2025