Transactional funding: A complete guide for small businesses

Lending markets for small businesses are becoming increasingly expensive as interest rates rise and lenders look to shed credit risk. This is especially true in real estate, where mortgage rates remain elevated and applications have dropped sharply.

For small real estate investors and other entrepreneurial businesses, alternatives exist. Among them is transactional funding, a fast, low-risk borrowing option built for back-to-back deals.

What is transactional funding?

Transactional funding is a type of short-term loan, typically lasting 1 to 30 days, in which an intermediary purchases an asset from a seller and immediately resells it to a third party at a profit through what's known as a double closing.

Transactional funding is most commonly associated with real estate wholesalers who want to buy and sell a property in a very short time frame, often within a single day. That's why these deals are also called flash funding or same-day funding.

Some commercial credit companies also offer transactional funding as an alternative to factoring or short-term bridge financing, and to finance back-to-back sales of collectibles, luxury goods, or art.

Aside from the transactional funding lender, three entities are involved in these deals, usually denoted as A, B, and C. This is why these transactions are sometimes referred to as ABC loans.

• A is the original seller of the asset. For example, a bank disposing of a foreclosed REO property through a short sale, or a small business selling receivables that can't be factored economically.
• B is the intermediary investor or small business that buys the asset from A using the transactional funding loan and sells it on to C at a profit, then repays the loan with the proceeds from the sale to C. This process is usually referred to as wholesaling.
• C is the end buyer of the asset, who can extract further value from it. For example, a real estate contractor that can renovate a property and eventually sell it at a profit.

Transactional funding offers a fast, flexible financing solution enabling intermediaries to profit from back-to-back asset sales with minimal capital risk.

Who are the transactional borrowers?

These loans are designed to finance the purchase of an asset by an intermediary (B) that doesn't want to use its own capital or is unable to do so because of credit or cash flow issues.

Transactional funding deals have been used mainly in the commercial and residential real estate market by property flippers. However, they can be useful in other ways to small businesses facing capital constraints. The borrowers/wholesalers in these transactions provide to asset sellers:

• Short-term inventory financing if a company has a purchase order from a client but hasn't issued an invoice that can be factored
• Bridge financing for short-term acquisitions outside the real estate marketplace, where the B business has unique access to a motivated seller and the asset is reasonably fungible
• Bridge finance to overcome temporary supply chain disruptions

In these deals, wholesale middlemen add value by connecting the original asset seller (A) to the end buyer (C) and must have strong contacts among both types of entities. Otherwise, the sellers would transact with the buyers directly. One example of such a middleman is an angel investor that has worked with both asset sellers and buyers, or that can assist a portfolio company in arranging a deal.

Who are the transactional lenders?

Transactional funding creditors are nonbank private lenders such as finance companies, venture capital firms, and in some cases, individuals. They're often called "hard money lenders," a somewhat pejorative term that dates from when they were little more than business loan sharks.

Now, however, they're usually competent professionals, and the term simply distinguishes them from regulated lenders like banks. They're able to work with borrowers that traditional lenders pass by due to credit concerns or the bespoke nature of their borrowing needs.

Because hard money loans typically don't require extensive documentation, the intermediary's costs for title insurance, appraisals, inspection reports, and legal advice are minimized.

Does transactional funding require a credit check?

These loans often don't require a credit check because they rely on the value of the collateral rather than the creditworthiness of the intermediary borrower, as well as the fact that the eventual buyer (C) can prove it has secured financing and committed to the purchase.

Since they aren't dependent on an intermediary borrower's credit, they're particularly useful for small or new borrowers, or even individual investors, who might have weak credit or no credit record and would otherwise have to pay much higher rates in the traditional debt markets.

How does transactional funding work?

The transactional funding process follows a straightforward double-closing structure.

Here are the steps involved.

1. Secure a property under contract: The wholesaler/borrower (B) negotiates a purchase agreement with a motivated seller (A). This is the A-to-B contract.
2. Find an end buyer: The wholesaler locates a financially sound buyer (C) and secures a contract at a higher price—the B-to-C contract. The buyer provides proof of its ability to purchase the property immediately.
3. Apply with a transactional lender: The wholesaler submits both signed contracts and proof of the end buyer's financing to the transactional lender for approval
4. Close the A-to-B transaction: The transactional lender funds the wholesaler's purchase of the asset from the original seller
5. Complete the B-to-C sale: Once the A-to-B transaction closes, the wholesaler immediately sells the asset to the end buyer. The sale proceeds repay the transactional funding lender, and the wholesaler keeps the profit.

Once both closings are complete, the wholesaler repays the lender and retains the profit, concluding the transactional funding cycle efficiently.

Transactional funding for real estate wholesalers

Real estate wholesalers are the primary users of transactional funding because their entire business model depends on buying and reselling properties quickly without tying up their own capital.

Wholesalers often choose transactional funding over assignment contracts for several important reasons:

• Double closings: When you want to keep your profit margin private from both the seller and the end buyer, a double closing with transactional funding keeps each side of the deal separate.
• Non-assignable contracts: When the original seller's contract prohibits assignment, transactional funding lets you close the deal by actually purchasing the property before reselling it.
• Higher-value deals: When assignment fees would raise red flags with lenders or buyers, closing through transactional funding presents a cleaner transaction.

While recent years have seen fluctuations in flipping activity, wholesaling remains a significant segment of the real estate market. According to data provider Attom, in 2024, 297,885 single-family houses and condominiums in the US were flipped, representing 7.6% of all home sales that year.

Transactional funding for startups and small businesses

Transactional funding isn't limited to real estate. Startups and small businesses facing capital constraints can use it to bridge short-term gaps between purchasing and receiving payment.

For example, if you have a confirmed purchase order from a client but haven't yet issued an invoice that can be factored, transactional funding can provide the short-term inventory financing you need to fulfill the order. It can also help you take advantage of time-sensitive acquisition opportunities where you have access to a motivated seller and a ready buyer.

That said, non-real-estate applications are less common. Most transactional lenders specialize in property deals, so you may need to search specifically for lenders comfortable with other asset types.

Benefits and limitations

Here are the principal benefits of transactional funding deals:

• 100% LTVs: The loan can cover the full purchase price of the property, since the C buyer has already been identified and its financial wherewithal established
• No credit score checks: These transactions don't require a credit check on the B borrower/wholesaler, only a proof of funds letter from the C buyer
• Speed: These transactions can be arranged and closed quickly, in some cases within a day, allowing the B borrower/wholesaler to take advantage of opportunities that would otherwise pass it by

Some of the main risks and limitations to these deals are:

• Short loan tenors: Say a borrower runs into a problem closing the second, B-C leg of the transaction, and cannot repay the loan within the agreed-upon time period. Lenders can impose fees or change the loan into a standard, more expensive, term interest rate instrument at a lower LTV.
• Closing costs: These must be paid on both transactions
• Dependence on the viability of the end buyer: The end buyer (C) must prove it's financially capable of purchasing the asset in the time period allowed

Keep in mind that transactional funding availability also varies by state. Not all lenders operate in every market, so you'll want to verify coverage before committing to a deal structure that depends on this type of financing.

How much transactional funding costs

Transactional funding pricing varies by lender, deal size, and loan duration. Understanding the fee structure up front helps you accurately calculate your profit margin on any deal.

Percentage-based pricing

Most transactional lenders charge a percentage of the total loan amount. This is the most common pricing model, and the rate typically scales with the loan duration. Same-day closings cost less than deals that stretch closer to 30 days.

Flat fees and points

Some lenders use flat-fee or points-based pricing instead. Origination points, a percentage of the loan amount charged up front, are common. This model can be more predictable for budgeting, but make sure you understand whether points are charged in addition to or instead of percentage-based fees.

Additional closing costs to expect

Beyond the lender's fee, you'll encounter additional costs on both sides of the double closing:

• Origination points: A percentage of the loan amount charged up front
• Wire transfer fees: Costs for moving funds between parties
• Document preparation: Fees for loan paperwork and closing documents
• Extension fees: Charges if you need the loan beyond the initial term
• Title and escrow fees: Costs associated with closing through a title company on both the A-to-B and B-to-C transactions

Factor all of these into your deal analysis before committing. A deal that looks profitable on the spread between purchase and sale price can thin out quickly once you account for double closing costs.

Eligibility requirements for transactional funding

Qualifying for transactional funding depends more on the strength of your deal than on your personal financial profile. Lenders evaluate the transaction itself, not your credit history.

You'll typically need the following to get approved:

• Signed A-to-B purchase contract: Your agreement with the original seller, showing the purchase price and terms
• Signed B-to-C sales contract: Your agreement with the end buyer at a higher price, confirming the spread that makes the deal viable
• Proof of end buyer financing: Evidence your buyer has cash on hand or a loan approval letter—this is the lender's primary risk mitigation
• Title company coordination: A title company or closing attorney willing to handle double closings, since not all title companies will
• Entity documentation: Many lenders require you to close through an LLC or other business entity rather than in your personal name

The key takeaway: If you have a solid deal with a verified end buyer, you're likely eligible regardless of your credit score or how long you've been in business.

How to find the best transactional funding lenders

Finding the right lender can make or break your deal timeline. Not all transactional lenders are created equal, and the market includes several types of providers.

Private transactional funding companies

Specialized firms that focus exclusively on transaction funding for real estate investors are often your best bet. They understand the double-closing process, move quickly, and typically offer the most competitive pricing because this is their core business.

Hard money lenders offering transaction loans

Some hard money lenders include transactional lending as part of a broader product suite alongside fix-and-flip loans and bridge financing. These lenders can be convenient if you need multiple financing products, but their transactional funding terms may not be as competitive as a specialist's.

Online transactional lending platforms

Digital platforms have made it easier to find and compare transactional lenders regardless of your location. These platforms often offer fast applications and quick funding decisions, which is helpful when you're working on a tight closing timeline.

When evaluating any lender, keep these tips in mind:

• Verify they lend in your state: Confirm coverage before applying
• Check for up-front fees: Reputable lenders don't charge until closing
• Review funding timelines: Make sure they can meet your closing date
• Ask about proof of funds letters: Confirm they provide documentation you can show sellers during the contract phase

Choosing the right transactional lender requires careful vetting, but finding a reliable partner ensures smoother deals and better long-term profitability.

Transactional funding availability by state

Transactional funding isn't available everywhere. Lender coverage varies by state due to licensing requirements, regulatory differences, and market demand. Before you structure a deal around transactional funding, confirm that your chosen lender operates in your state.

Some of the most active markets for transactional funding include:

• Florida: One of the most active wholesaling markets in the country, with broad lender coverage
• Ohio: Available through multiple lenders, particularly in metro areas such as Columbus and Cleveland
• Tennessee: Growing availability as the wholesaling market expands
• Illinois: Check Chicago-area lenders for the widest selection of options
• New Jersey: Verify lender licensing, as state regulations can be more stringent
• Pennsylvania: Multiple options available across the state
• Michigan: Confirm current lender coverage, as availability can shift

If you're in a state not listed here, that doesn't mean transactional funding is unavailable. It just means you may need to do more research to find a lender that covers your market.

How proof of funds letters work with transactional funding

A proof of funds (POF) letter is a document from your transactional lender confirming that financing is available for your purchase. Sellers and their agents often require this before they'll accept your offer or move forward with a contract.

Most transactional lenders will issue a POF letter before you have a specific deal under contract. This lets you make offers with confidence and show sellers you're a serious buyer who can close quickly.

To obtain a POF letter, you'll typically need to complete a basic application with your lender and provide some information about the types of deals you're pursuing. The letter itself usually states that the lender is prepared to fund transactions up to a certain amount, subject to deal review and approval.

Having a POF letter ready before you start making offers speeds up the entire process and gives you a competitive edge over buyers who need time to arrange financing.

Transactional funding vs. EMD funding and bridge loans

Transactional funding is one of several short-term financing options available to real estate investors. Understanding how it compares to similar products helps you choose the right tool for each deal.

Transactional funding vs. EMD funding

EMD (earnest money deposit) funding covers only the deposit required to secure a property under contract, not the full purchase price. Transactional funding covers the entire transaction. If you just need help putting down earnest money to lock up a deal while you find an end buyer, EMD funding is the lighter-weight option.

Transactional funding vs. hard money loans

Hard money loans are designed for longer-term projects such as fix-and-flip renovations, with terms typically ranging from 6 to 24 months. Transactional funding, by contrast, lasts hours to days. Hard money loans also require the property as collateral and involve more extensive underwriting, while transactional funding relies primarily on your end buyer's committed purchase.

Transactional funding vs. bridge loans

Bridge loans serve a different purpose entirely. They're designed to bridge a gap between two longer-term financing events, such as selling one property and buying another, with terms of 6 to 12 months. They also carry more traditional credit-based qualification requirements. Transactional funding is faster, shorter, and focused specifically on double closings.

Alternatives to transactional funding

Small businesses that want to avoid the document-gathering hassle and restrictive covenants typical of standard bank loans, but aren't looking to do a back-to-back asset flip, have a number of financial alternatives to consider.

Equity

• Crowdfunding: Several crowdfunding platforms, such as Fundable and Kickstarter, let you post your ideas or objectives and offer equity in exchange for business funding
• Angel investors: High net worth individuals who provide financing for startup companies and entrepreneurs
• Venture capital firms: Venture capital (VC) firms provide longer-term capital to help businesses grow into something substantial. In exchange for equity, a venture capitalist could fund a pre-seed, seed, or growth stage. VC investments range from $100,000 to several million dollars.

Debt

• SBA loans: The US Small Business Administration (SBA) works with local banks to partially guarantee loans for startups and small businesses. The terms are more flexible than a normal bank loan, interest rates are lower, and the qualifying criteria are less stringent.
• Venture debt: Companies funded by venture capital can qualify for venture debt offered by specialized lenders. This option is often used to extend the cash runway or cover capital expenses as the startup scales between equity rounds.
• Revenue-based financing: Companies with recurring revenue models (e.g., SaaS, payments) can work with specialty lenders to access capital in exchange for, or underwritten per, future revenue. This lets you scale on your terms, leveraging future sales to drive near- and long-term growth.
• Peer-to-peer lending: Several popular business loan sites are run by peer-to-peer lenders. Terms and interest rates vary and can run high with certain sites, but P2P lending approval criteria are typically lenient.

How to get the best transactional funding for your deal

Whether you're closing your first wholesale deal or your fiftieth, a few best practices can help you get better terms and protect your margins.

• Compare multiple transactional lenders: Get quotes from at least 3 providers so you can benchmark pricing and terms
• Lock in your end buyer first: A strong, verified B-to-C contract is the single most important factor in getting fast approval and favorable rates
• Coordinate with your title company: Confirm they handle double closings before you apply for funding. Not every title company will, and discovering this late can derail your timeline.
• Track all transaction costs: Between lender fees, double closing costs, and wire fees, expenses add up fast. Use expense management tools to monitor every dollar so you know your true profit margin on each deal.
• Build lender relationships: Repeat borrowers often get better rates and faster funding. If you're wholesaling regularly, developing a relationship with one or two reliable lenders pays off over time.

If you're managing multiple deals or scaling your real estate investing business, having a clear picture of your expenses across transactions is critical. Tools like Ramp's expense management platform can help you track costs in real time and keep your finances organized as deal volume grows.

How Ramp can help you with alternative funding

Through our platform, you can access the working capital you need to grow your business more quickly, while having the finance automation tools at your disposal to manage it. We can even help you build your business credit. Here's how:

1. Commerce sales-based underwriting

Unlike some revenue-based lenders, Ramp has reasonable banking and revenue requirements to offer you the credit bandwidth you need to cover expenses and finance growth. This is particularly useful for companies with limited funds in the bank and e-commerce companies that are working with small margins. Ramp can assist in both of those scenarios.

2. Expense management

Getting the funds to start and grow your company is only half the equation. Managing those funds by controlling expenses and tracking cashflow through effective business expense software is how a company builds a healthy financial culture and reaches profitability. Ramp has the tools to help you do this, including prepaid credit cards for business and virtual credit cards for business. We offer real-time tools to track business expenses, spending controls, and API integrations with your go-to accounting software to keep it all in order.

3. Building credit

Using our commerce sales-based underwriting and controlling your spending are two great ways to build business credit. And since Ramp is a charge card, there's no need to worry about carrying a balance month-to-month, incurring interest, or pesky utilization ratios to calculate.

Need working capital to fuel your business? Consider Ramp

Running a business is hard and accessing working capital to help streamline your day-to-day operations can be an even bigger chore. With Ramp, you can access the working capital you need, faster, with our commerce-sales-based underwriting process.