Transactional funding is a very short-term loan, often lasting just hours to a few days, used almost exclusively to fund a double close in a wholesale deal. The wholesaler borrows the money to actually purchase the property (the "A-to-B" transaction), then immediately resells it to the end buyer (the "B-to-C" transaction) using the end buyer's funds to repay the loan the same day or within days. The wholesaler never uses their own capital and holds the property for a matter of hours, not as a long-term investment.
Why Use It Instead of Assigning the Contract
Most wholesale deals use a simpler method: assignment of contract, where the wholesaler sells their right to buy under the contract to the end buyer for a fee, without ever taking title. Transactional funding exists for the situations where assignment doesn't work:
- The original contract prohibits assignment — common with bank-owned (REO) properties and some agent-listed deals.
- The wholesaler doesn't want the seller or end buyer to see the assignment fee spelled out on a settlement statement — a double close keeps the two transactions and two prices separate.
- The seller or listing agent objects to assignment language in principle, even where it isn't explicitly barred.
In these cases, the wholesaler needs actual purchase funds to close the first transaction, even if only for a few hours — that's what transactional funding provides.
How It Actually Works
- The wholesaler has the property under contract with the original seller (transaction A-to-B) and has already lined up a confirmed end buyer (transaction B-to-C).
- A transactional funding lender provides the purchase capital for the A-to-B closing, typically requiring proof that the B-to-C sale is already scheduled to close, often the same day or within a few days.
- The A-to-B closing happens first — the wholesaler takes title.
- The B-to-C closing happens immediately after, sometimes the same day, using the end buyer's funds.
- Proceeds from the B-to-C sale repay the transactional funding loan plus the lender's fee, and the wholesaler keeps the spread between the two sale prices.
Because the loan is repaid within hours or days, transactional funding is typically priced as a flat fee (often a percentage of the loan amount) rather than an annualized interest rate — the lender's real underwriting concern isn't the borrower's credit, it's whether the B-to-C sale is genuinely lined up and will actually close.
What Lenders Actually Require
- A confirmed, funded end buyer for the B-to-C transaction — most transactional lenders won't fund without proof this second closing is real and imminent
- Both closings scheduled at the same title company or attorney, often on the same day or within a very short window
- Clean title on the property
Because approval hinges on the deal itself rather than the borrower's financial profile, transactional funding is generally faster and less document-heavy to arrange than a conventional loan — but only for deals where the resale is already lined up. It is not a substitute for hard money on a buy-and-rehab deal, where the property is held for months, not hours.
What to Watch Out For
- It only works if the end buyer's closing is real. If the B-to-C sale falls through after the wholesaler has already closed on the A-to-B purchase, the wholesaler is stuck holding the property and owing the transactional loan.
- Fees add up on thin-margin deals. The lender's flat fee comes directly out of the wholesaler's spread — on a deal with a small assignment-equivalent profit, transactional funding costs can eat a meaningful share of it.
- Not every lender or title company is set up for same-day double closes — confirm both the funding source and the closing agent can actually execute the timeline before relying on it.
- It's a niche tool, not a general financing source — it's specific to same-day or near-same-day double closes, not a substitute for acquisition or rehab financing on deals with a longer hold.
Frequently Asked Questions
Is transactional funding the same as hard money?
No. Hard money is used to fund a purchase and hold a property for months during a rehab. Transactional funding is used to fund a purchase that's resold again within hours or days, typically for a double close.
Do I need good credit to get transactional funding?
Generally no — approval is based mainly on having a confirmed, ready-to-close end buyer for the resale, not the borrower's credit profile.
Why not just assign the contract instead?
Assignment is simpler and cheaper when it's available, but it doesn't work when the original contract prohibits assignment or when the wholesaler wants to keep the assignment fee separate from the transaction paperwork — that's specifically when a double close funded by transactional funding is used instead.