By Nema Daghbandan, Esq.

California is unequivocably the largest private lending market, particularly for Bridge Loans (definition below), while DSCR (definition below) lending is beginning to emerge as a growing segment. In this article, we examine year-to-date lending activity in California and compare it to national trends, highlighting differences in loan volumes, interest rates, and average loan amounts to hopefully provide the reader with useful benchmarking to understand their own business.

The analysis draws on anonymized loan data from a broad set of private lenders active on Lightning Docs, a business purpose loan document software tool utilized by private lenders. By looking at California alongside the national landscape, this report provides insight into the state’s unique market dynamics and emerging patterns that are shaping lending strategies today.

Bridge Loan: Any loan with a duration of 36 months or less utilizing interest-only payments for the duration of the term and containing a balloon payment at the end of the loan. Bridge loans are commonly referred to as residential transition loans (RTL), fix-and-flip, non-owner occupied, hard money, or in other terms that describe a short-term loan generally secured by a residential property for investment purposes.

DSCR Loan:  A 30-year term loans secured by rental property. DSCR stands for Debt Service Coverage Ratio, which identifies that the primary underwriting for these loans is done by dividing the monthly net operating income of the property by the monthly debt service.

User: A unique company using the Lightning Docs platform. If multiple individuals within the same company access the platform, they are collectively counted as a single user.


Bridge Loans

Nationally, bridge loan activity began to level off in April 2025 after several months of steady growth. California—by far the largest market for bridge loans in our dataset—has closely mirrored that trend. Following a strong start to the year, bridge loan volume has flattened through Q3, with September’s total returning to the same level seen in March.

Like the national average, bridge loan interest rates in California have declined throughout the year. With a September average of 10.14%, California sits 29 basis points lower than the national average of 10.43%. It’s no surprise that average loan amounts remain substantially higher. At over $1.1 million in September, California bridge loans are nearly $400,000 above the national average.

The most significant rate difference between California and the rest of the country is the share of lower-rate loans. Nationally, only 10% of bridge loans carry rates below 9%, while in California that figure doubles to 20%.

In looking at the states with the highest average bridge loan interest rates, Kansas leads the way at 12.09%. Michigan, Missouri, Nevada, and Wisconsin round out the top 5. California lands at #40 on the list at 10.44%.

While California’s statewide averages trend lower than national figures, the picture varies widely by county. Among the state’s top-performing bridge loan markets—Los Angeles, San Diego, Orange, Santa Clara, and Alameda—interest rate patterns have moved in different directions.

For the past three months Los Angeles has moved in sync with the state average staying 18-19 basis points above it in each month.

San Diego has followed a more unique path, closing its gap with the state average. In July, San Diego was 18 basis points below the state average, by September that had narrowed to just 7 basis points.

Orange County has followed a similar trend as San Diego, closing the gap with the state average but with a different journey to get there. In July, Orange County had the highest rates of this group of counties, sitting at 60 basis points above the state average. By way of a half percentage point drop in August, followed by another significant drop in September, Orange County is now just 4 basis points above the state average.

Santa Clara is a bit of an outlier. With some of the highest loan amounts not just in California, but in the country, it also has the lowest average interest rates in this group, well below the state average. In August, Santa Clara spiked up to 9.59% but otherwise typically lands over a full percentage point below the state average.

Alameda is similar to Santa Clara, in that it also increased average rates in August. In September Alameda’s average interest rate dropped along with the state average and currently sits 14 basis points below it.

Looking nationally, California dominates bridge lending activity. Four of the top ten counties by number of bridge loan transactions are in California, with Los Angeles and San Diego ranking #1 and #2 nationwide. Both counties have recorded more than twice as many transactions as Cook County, Illinois, which ranks third. Notably, San Diego and Santa Clara have already surpassed their 2024 loan totals through Q3 of this year.

DSCR Loans

The biggest story nationally of 2025 has been the runaway growth in DSCR lending, up 105% year-to-date. California, not historically seen as a DSCR market, has emerged as a significant contributor to that growth. DSCR lending in the state is up 168% year-to-date, with 1,232 loans closed so far this year, which is especially remarkable given that California had just 227 DSCR loans in all of 2023.

California’s average DSCR rates have stayed in line with national trends, typically within a few basis points each month. In September, the state’s 7.17% average was 7 basis points below the national figure. Loan amounts tell a different story: throughout the year, California’s average DSCR loan size has been more than double the national average. While September’s $583,000 average represents a decline from earlier in the year, it still underscores California’s higher-value investment properties.

Nationally, we’ve just begun to see a small market for sub-6% loans pop up. California has been one of the biggest contributors to that with 7% of DSCR loans falling below 6% in September.

States with the highest DSCR rates are concentrated in the Midwest, led by Minnesota (7.74%), followed by Iowa, Illinois, New Mexico, and Michigan. California comes in at #22 on the list at 7.53%.

Just as with bridge loans, local markets in California show unique DSCR rate patterns. Among the state’s top DSCR markets—Los Angeles, Orange, San Diego, Riverside, and San Bernardino—trends vary considerably.

In July, Los Angeles sat 10 basis points above the state average, however in the last two months the county has dropped at a faster pace than the state average and is now 8 basis points below it.

Orange County has seen rising interest rates over the last few months. In July it was 24 basis points below the state average, in August it was nearly identical, and now in September it is 35 basis points higher than the state average.

San Diego stuck closely to the state average in July and September, however it experienced a spike to 7.69% in August when it was 30 basis points above the state average.

Riverside has seen the greatest variance in rates among our top five counties. In August rates were 28 basis points below the state average. That took a swing in September where they now lie 53 basis points above the state average.

San Bernardino rates experienced a nearly identical journey as San Diego following the same August spike. In all three months the two counties were within 2 basis points of each other.

Even with explosive growth, California’s DSCR market still trails its bridge market dominance. The state currently ranks #7 nationally by DSCR loan volume. To illustrate the rapid nationwide expansion, Los Angeles County has already closed 100 more DSCR loans than in all of 2024, yet still slipped from 9th to 10th in national ranking due to broader market growth elsewhere.

California continues to anchor the bridge lending market, accounting for more than one in every five bridge loans generated on Lightning Docs. For both bridge and DSCR loans, California’s rates tend to sit below national averages, while loan sizes remain the highest in the country.

Although the majority of lenders in California remain focused on bridge loans, the momentum behind DSCR lending is undeniable. With 165% growth year-to-date, it has quickly evolved from a niche product to a central part of the state’s private lending ecosystem. Early adopters have already begun to see the upside of diversifying into this growing market segment and if current trends continue, 2025 may mark the year DSCR lending firmly takes root in California.

Summary

California is an incredibly competitive market and remains an attractive market to compete in. However, California is clearly not a monolith, and the unique environments of each market can be quite pronounced. Private lenders must stay nimble and adaptable to understand what is happening in their markets or risk being left behind.

Nema Daghbandan is a Partner with Fortra Law, and the CEO of Lightning Docs™. He can be reached at nema@lightningdocs.ai.