How a 90% LTC Fix-and-Flip Loan Actually Works (and Why Your Bank Said No)

If you have ever brought a real fix-and-flip deal to a traditional bank, you already know how the call ends. Two years of tax returns. W-2s. A debt-to-income ratio that pretends your full-time investing income does not exist. A 45-day underwriting cycle that means the property is gone before you ever sign. The math is great, the deal is real, and the answer is still no.

This is not a bank problem. It is a product mismatch. Banks underwrite borrowers. Private capital lenders underwrite deals. Most active flippers need the second type, and most do not know it exists in this form until they bring a deal that needs to close in less than three weeks.

What 90% LTC Actually Means

Loan-to-cost (LTC) is not the same as loan-to-value (LTV). LTC is calculated on the total project cost: purchase price plus rehab budget. At 90% LTC, a lender funds 90 percent of that combined number and the investor brings 10 percent plus closing and carry. On a $185,000 purchase with a $42,000 rehab — total project cost of $227,000 — that means a loan of roughly $204,000 and an investor cash requirement of about $23,000 before closing costs and interest carry.

That is the structure that makes high-velocity flipping possible. Investors who only use cash do one or two deals a year. Investors who use 90% LTC leverage do six or more, because the same $50,000 of working capital cycles through multiple projects.

Why Banks Cannot Compete on This Product

Traditional banks underwrite the borrower’s W-2 income, debt-to-income ratio, and personal FICO. They do not underwrite the as-repaired value (ARV) of a property the borrower has not yet renovated. They cannot release rehab funds in draws against milestone completion. Their 45-day underwriting cycle is longer than the listing window on most distressed properties. None of this is a flaw in the bank — it is what banks are built for. It is just not the product an active flipper needs.

How Rehab Draws Work

On a private capital fix-and-flip loan, the rehab portion of the loan does not get handed to the borrower at closing. It gets released in draws as the rehab is completed. A typical structure looks like this: a draw on demo and rough framing, a draw on mechanical rough-in, a draw on drywall and paint, and a final draw on finish work. The lender sends an inspector to verify each milestone before releasing funds. This keeps the lender protected and forces the investor to actually execute on the budget.

The practical implication: the investor needs working capital to start each phase before the corresponding draw arrives. That is why we underwrite project cash management, not personal income.

What We Look At Instead of FICO

• Deal quality: purchase price relative to ARV, neighborhood comparables, condition of the property at acquisition.
• Rehab budget: itemized scope of work and contractor bids, not a number on a napkin.
• Exit strategy: comparable sales within 90 days, listing strategy, holding capacity if the resale market shifts.
• Track record: prior flips completed, even if they were done with cash. We want to see that the borrower has finished a project before, not that they have a 780 credit score.
• Liquidity reserves: enough working capital to carry the project to the first draw.

Timing: Why 10 Days Matters

The reason a private capital lender can close a fix-and-flip loan in 10 to 14 days is the same reason a bank cannot. Banks pull tax returns, run an automated underwriting system, order an appraisal, run the file through QC, and route to a credit committee. Private capital lenders order an as-is and as-repaired appraisal, verify the borrower’s track record and reserves, and fund. Different product, different timeline.

On a deal where the seller is motivated and the listing is fresh, 10-day close is often the difference between winning the property and losing it to a cash investor at a lower price.

What the Application Looks Like

Two minutes online. Property address, purchase price, rehab budget, ARV, and a contact number. We pull in the lender match within 24 hours and start verification. If the deal works, you have a term sheet that week.

Start the application at slatefinancial.io/apply/fix-and-flip.

A Note on Compliance

Funding is subject to lender approval. The 90% LTC figure is a maximum for qualifying deals, not a guarantee. Rates, terms, and draw schedules vary by lender and by deal. Numbers in this article are illustrative and results are not typical. Always run your own deal math before signing a term sheet.

If your bank is the bottleneck on your next flip and you want to see whether the deal qualifies for private capital, start the two-minute application at slatefinancial.io/apply/fix-and-flip. We will tell you within 24 hours whether we can close it.

Need Business Funding?

Slate Financial matches you with the best funding options. Apply in minutes with no credit impact.

Tags