Traditionally, a borrower would tap a balance sheet lender because of its ability to lend quickly and quite likely to build a relationship with the institution. If they wanted the best deal, though, they would go to a debt fund. 

Now, with interest rates on the rise and because of the way these entities manage their own capital sources, the costs have become comparable, says one balance sheet lender.  "We are more competitive than we have ever been," says Scott Larson, managing principal of Pangea Mortgage Capital.

With costs basically the same now, balance sheet lenders are also able to better compete on their strengths of flexibility and relationship building.

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