Gap Funding: Close the Deal When You're Short the Equity
Most hard money and fix & flip lenders fund 80–90% of the purchase and 100% of the rehab — which still leaves you bringing tens of thousands to closing between the down payment, closing costs, and reserves. Gap funding covers that difference so a good deal doesn't die waiting on your liquidity.
What Gap Funding Covers
- Down payment gap — the 10–20% your primary lender won't fund
- Closing costs — points, title, escrow, insurance
- Rehab overruns — when the budget grows mid-project
- Earnest money deposits — locking up a deal before your capital frees up
How It's Structured
Gap funding usually sits in second position behind your primary lender, secured by the property, or is structured as a joint venture where the gap funder takes a share of the deal's profit instead of interest. Which structure fits depends on your primary lender (some prohibit secondary liens), the deal's margin, and your track record.
An undisclosed second lien can breach your first-position loan terms — we structure the gap so both lenders are aware, documented, and aligned.
What a Fundable Gap Deal Looks Like
- Strong spread — the deal supports two layers of capital, typically 70% ARV all-in or better
- Clear exit — flip sale or refinance with a realistic timeline
- Skin in the game — gap funders want you to have something at risk, even if small
- Experience helps but a great deal with a tight scope of work can outweigh a thin resume
Why UpStallion
We look at the whole capital stack, not just one slice. Often the right answer isn't gap funding — it's a different first-position lender with higher leverage, or a JV structure that costs less than stacked interest. We tell you which, then connect you to it.
Frequently Asked Questions
Is gap funding expensive?
Second-position money costs more than first; expect higher rates or a profit share. On a deal with real margin, it's the difference between 100% of nothing and most of something.
Will my primary lender allow it?
Some do, some don't. Never hide a second lien; we structure gaps transparently with lenders who permit them.
Can gap funding cover 100% of my cash to close?
On strong deals, yes; combined leverage can approach 100% of total project cost.