Transactional funding is a very short-term loan, often lasting just a single day, that real estate wholesalers use to buy and immediately resell a property through a double closing. The wholesaler borrows enough money to purchase a property from the original seller, then sells it to an end buyer minutes or hours later, using the sale proceeds to repay the loan. It’s sometimes called flash funding or same-day funding, and it exists specifically to make back-to-back real estate closings possible when the wholesaler doesn’t have the cash to buy the property outright.
How the A-B-C Transaction Works
Every transactional funding deal involves three parties, which is why these arrangements are sometimes called ABC loans. “A” is the original seller of the property, often a bank selling a foreclosed home or a motivated homeowner looking for a quick sale. “B” is the wholesaler or intermediary investor who buys the property and immediately flips it. “C” is the end buyer, who purchases the property from the wholesaler at a higher price.
The wholesaler’s profit is the spread between what they pay the original seller and what the end buyer pays them. If the wholesaler contracts to buy a property from the seller for $120,000 and has an end buyer lined up at $145,000, the $25,000 difference (minus loan costs and closing fees) is the wholesaler’s margin.
The Double Closing Process, Step by Step
Transactional funding follows a structured double-closing sequence. First, the wholesaler negotiates a purchase agreement with the original seller. This is the A-to-B contract. Next, the wholesaler finds an end buyer and locks in a second contract at a higher price. This is the B-to-C contract. The end buyer typically needs to provide proof of financing or funds to show they can close immediately.
With both contracts signed, the wholesaler applies with a transactional lender, submitting the two signed contracts and evidence that the end buyer’s money is real. If approved, the lender funds the wholesaler’s purchase from the original seller. That first closing happens, title transfers to the wholesaler, and then the second closing takes place right away. The end buyer’s payment flows back to repay the transactional lender, and whatever is left after fees is the wholesaler’s profit.
Both closings often happen on the same day, sometimes within the same hour at the same title company. Because these are two separate, fully documented real estate transactions, the original seller never sees what the end buyer paid, and the end buyer doesn’t know what the wholesaler paid to acquire the property.
What Transactional Funding Costs
Because the loan lasts a day or two rather than months, transactional lenders typically charge a flat fee based on the loan amount rather than a traditional interest rate. Same-day closings generally cost less than deals that stretch closer to 30 days. The total cost is significantly lower than other short-term financing options like hard money loans, which charge higher interest rates, origination fees, and sometimes prepayment penalties.
The tradeoff for that low cost is rigid timing. The wholesaler must have an end buyer locked in before the lender will fund the deal. If the B-to-C sale falls through, the wholesaler is stuck owning a property with a loan that was never designed to last more than a day or two.
What Lenders Want to See
Transactional lenders don’t evaluate deals the way a mortgage company or even a hard money lender would. They care less about the property’s appraised value or the borrower’s credit history and more about whether the second sale is locked down. The core requirements are a signed purchase contract with the original seller, a signed sales contract with the end buyer, and verified proof that the end buyer has the funds or financing to close.
The lender’s risk is essentially limited to whether the B-to-C transaction will actually happen. If the end buyer’s money is confirmed and both contracts are in place, approval can come quickly. If there’s any doubt about the end buyer’s ability to close, the lender won’t fund the deal.
Title Company and Funding Rules
Double closings depend heavily on the title company or settlement agent handling both transactions. Not every title company is willing to facilitate back-to-back closings, so wholesalers often need to find one experienced with this type of deal.
State laws also play a role. Many states have “good funds” laws requiring that a settlement agent cannot disburse money from an escrow account until sufficient collected funds have been received and deposited. Some states have “wet settlement” laws requiring that loan funds be disbursed at or before the time of closing. These rules govern when and how the title company can move money between the two transactions, and they vary significantly from state to state. A transactional lender that operates in one state may not be licensed in another, so confirming that your lender covers your state is an essential early step.
How It Differs From Hard Money Lending
Hard money loans and transactional funding both serve real estate investors, but they solve different problems. Hard money loans are designed for projects that take months or even a few years, like buying a fixer-upper, renovating it, and then selling. The lender evaluates the property’s value and potential, charges interest over the life of the loan, and tacks on origination fees and closing costs.
Transactional funding is built for speed. The loan exists for a day or two, the lender’s main concern is whether the end buyer will close, and the flat-fee structure keeps total costs lower. You wouldn’t use transactional funding for a renovation project, and you wouldn’t use a hard money loan for a same-day double closing.
Who Uses Transactional Funding
The primary users are real estate wholesalers who find underpriced properties, contract to buy them, and then line up a buyer willing to pay more. This strategy is most common with distressed properties, such as foreclosures or homes in poor condition that are difficult to sell on the open market. The wholesaler adds value by connecting a motivated seller who wants a fast sale with a buyer (often another investor) who sees potential in the property.
Transactional funding also shows up occasionally outside residential real estate. Some small businesses use similar structures when buying and reselling receivables or other assets where a quick turnaround makes traditional financing impractical. But the overwhelming use case is real estate wholesaling, and virtually all transactional lenders are set up to serve that market.
The key requirement for any wholesaler considering this approach is having both sides of the deal firmly in place before applying for funding. Transactional lending is not speculative capital. It’s a bridge that lasts just long enough to move a property from seller to end buyer, with the wholesaler collecting a margin in between.