Why Banks Refer Borrowers to Private Lenders in Costa Rica

It sounds like a contradiction. If a borrower is solid, why would a bank hand them to somebody else? Because banks decline on criteria, not on quality, and in Costa Rica several of those criteria have nothing to do with whether the person will repay.

Understanding which ones is the fastest route to understanding why this market exists and who is on the other side of your loan.

Reason one: bank requirements

Banks set their own requirements, which can make bank loans harder for newcomers. Bank loans can also take many months, if not longer, to close. Somebody who arrived last year with a paid-off house and provable income may still find a bank loan out of reach, and equity alone does not always change that.

That is one reason some borrowers are willing to pay a private rate.

Reason two: the calendar

Bank approval runs on its own schedule, and plenty of transactions do not. A purchase with a deadline, a business opportunity with a window, a contractor who has to be paid before the rainy season. A borrower who needs an answer in three weeks cannot use a bank process that can take many months, even when the answer would eventually have been yes.

Reason three: the property does not fit the box

Banks prefer conventional, finished, easily valued property in established areas. Land without services, a half-completed build, a farm, a mixed-use building, an unusual property with few comparables — all of these can be perfectly good security and still fall outside a lending policy written for houses.

A private lender can look at the asset itself and decide. That flexibility is the product, and it is priced through the loan-to-value ratio rather than through a policy manual.

Reason four: how the income arrives

Self-employment, rental income, a business abroad, earnings in a currency that is not colones or dollars. Income can be entirely real and still fail to present in the format a bank underwriter needs. The applicant is not being judged unreliable; their paperwork simply does not match the form.

Reason five: the amount or the term

Some requests are too small to be worth a bank’s process and too large for anything unsecured. Others are deliberately short — a bridge for eighteen months while a sale completes — and short terms sit awkwardly with products designed for fifteen years.

What this means when you read a file

The useful question is never why did the bank say no on its own. It is which of these reasons applies here. A decline over a bank’s requirements and a decline for undisclosed debts are entirely different files that arrive looking identical.

That is what the document review is for: establishing which one you are looking at before anything is decided. The assumption that a declined borrower is a weak borrower is the most expensive misreading in this market — expensive because it makes people walk away from the good files and, occasionally, feel relaxed about the bad ones.

And the rate comparison

One more thing worth knowing. Bank rates and requirements vary by bank and by applicant, so any comparison has to use that bank’s own current offer. What a borrower buys with a private loan is speed and access.

How a declined file actually reaches a private lender

Rarely as a formal referral on letterhead. More often the borrower is told, politely, that the application cannot proceed, and someone in the room — the attorney, the real estate agent, the accountant — mentions that private financing exists.

By the time such a borrower appears, they have usually spent weeks on a process that was never going to conclude, and they arrive better prepared than most: documents assembled, valuation done, and no illusions about what they are being offered. That preparation is one of the quieter advantages of this segment.

What the borrower does next

For some, the private loan is explicitly temporary: the plan is to refinance with a bank later, once they meet that bank’s requirements. Whether and when that happens is the bank’s decision.

Terms of six months to three years suit that kind of bridge. When a file names a bank refinance as its exit, the thing to verify is the plan behind it rather than the borrower’s optimism about it.

Here is how the two sides of that market find each other.

Frequently Asked Questions

Why might a bank decline a solid borrower?

Banks set their own requirements, which can make bank loans harder for newcomers, and a bank timeline can be too slow for a deadline.

Is a declined borrower a weak borrower?

Not necessarily. The reason for the decline matters, and the file shows which reason applies.

Can a private loan be refinanced with a bank later?

A borrower may plan for it, but the bank makes its own decision, so that exit needs to be checked.

What terms do these private loans have?

Six months to three years, with monthly interest-only payments and the principal due at maturity.

WhatsApp us at +506 4001 6413 to get started, call 855-562-6427 from the US or Canada, or email info@gap.cr.

Article by Glenn Tellier (Founder of CRIE and Grupo Gap)