The alternative lending market is populated largely by firms that launched after 2010, meaning the people running them have never had to navigate a collapsing real estate market, a wave of borrower defaults, or the pressure of returning capital to investors when property values are falling. According to H. Jack Miller, President and CEO of Gelt Financial LLC, this creates a structural vulnerability that investors weighing private money loans and private mortgage lending platforms are not adequately pricing in.
Miller, whose firm has been operating for nearly 38 years, argues that the absence of recession experience among newer lenders shapes underwriting standards, borrower selection, and portfolio management in ways that only become visible when conditions deteriorate.
Aggressive Lending Works Until It Doesn’t
Miller’s characterization of the cycle is blunt. Newer lenders enter the market, deploy capital aggressively, and perform well during periods of rising property values and low default rates. The strategy looks like skill until the environment shifts.
“Most of the lenders in business today, they didn’t survive the crash of 2008 and the global recession,” Miller says. “You have lenders who come in, they are super aggressive, and everything’s great until it’s not great. Then it’s not great, and they ultimately have a ton of losses, then they go out of business.”
The pattern appears across credit markets in every cycle, but in the private mortgage space – where a private lender often manages capital from individual accredited investors rather than institutional sources – the consequences of failure are more personal. When a private lender fails, the investors behind it often face extended delays in recovering principal, if they recover it at all.
Miller argues that lenders who have actually been through a severe downturn – who have taken back properties, managed foreclosures, and communicated losses to investors in real time – develop a fundamentally different approach to risk than those who have only operated in favorable conditions.
What Surviving a Crisis Actually Changes
Miller is direct about what the 2008 recession and subsequent years cost his firm. Gelt Financial took back over 200 properties during that period. The experience was, by his own description, a public and painful one.
“Where we’ve been beaten up, and it’s been very publicly beaten up, but we’ve also survived the fights,” Miller says. “I may have a black eye and broken ribs, but we survived them.”
That experience shapes how the firm underwrites its first-lien loans on commercial and investment real estate today. Gelt Financial caps its loan-to-value ratio at 65%, but Miller says the firm’s conservative approach to property valuation means the effective average LTV works out closer to 50 to 52%. The logic is straightforward: if property values decline during a downturn, a lender at 50% LTV has significantly more cushion than one operating at 75 or 80%.
The firm also structures its loans with floating rates tied to prime, with floors at the starting rate and caps at five points above. This protects investors from interest rate compression while limiting borrower exposure to runaway rate increases – a structure that Miller says reflects lessons learned from managing loans through periods of rate volatility.
Miller says the firm’s approach to taking back properties during downturns is to hold and lease rather than sell into a distressed market. “If we take a property back during a time of when the economy’s weak, like COVID, we just hold the property and lease it out. We wait a couple years till the economy changes.” This patience-based approach to loss mitigation requires sufficient liquidity and investor relationships built on long time horizons – neither of which newer entrants typically have.
Why Investors Should Ask a Private Lender About the Bad Years
Miller says sophisticated investors should actively seek out a lender’s account of its worst periods, not just its best. When speaking with new investors, he goes out of his way to describe what happened during the Great Recession and COVID – not to alarm them, but to demonstrate that the firm has a tested framework for navigating stress.
“When you can tell an investor, hey, this happened to us during the Great Recession of 2006 to 2011, and you walk the investors through the track record, and even the ugliness – most people know, investors are sharp. They know that no one gets through life unblemished,” Miller says.
The implication for investors evaluating private lending platforms: a clean track record may be a warning sign if the firm hasn’t operated long enough to have experienced a downturn. A lender that has never had a significant default, never taken back a property, and never had to communicate bad news to investors has simply not been tested.
How Institutional Memory Compounds Over Time
Miller positions Gelt Financial’s 37-year operating history as the firm’s most durable asset – not its current loan portfolio or its technology, but the accumulated knowledge of what goes wrong and how to respond. The firm’s closing documentation has been revised continuously over nearly four decades, with each problem encountered generating a new protective clause.
“Every time something happens, you change the document and keep changing it to improve it for yourself, to give you and the investor more,” Miller says.
The firm currently works with approximately 130 active investors, almost entirely through referrals – a distribution model that Miller says reflects the trust built through transparent communication during difficult periods, not just strong performance during good ones. About 10% of borrowers are slow pay at any given time, Miller notes, and the firm notifies investors of problems the same day they arise. Disbursements go out on the 20th of each month, and investors receive funds the following day – a schedule Miller says has held for 20 years.
For investors allocating capital to private lending, Miller’s perspective reduces to a single due diligence question: what happened to this lender’s portfolio the last time conditions turned against them? If the answer is “we weren’t around yet,” the investor is underwriting a strategy that has never been stress-tested.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.