In 2011, Ignite Funding found itself at a crossroads.

Since 1995, the Las Vegas-based company had functioned as the commercial lending element of a conventional mortgage business, but in the wake of the financial crisis, demand from developers and home builders for cash changed the business.

“We ramped up commercial lending,” Howard Robbins, a senior investment agent with Ignite, says. “From there, Ignite kind of took over the company, and now commercial lending is the entire business.”

Ignite facilitates hard money loans for home builders and developers in Nevada and Southern California by offering promissory notes secured by a deed of trust to investors.

Because Ignite links carefully screened borrowers and projects with suitable investors, lenders enjoy double-digit returns while being exposed to minimal risk. Today the firm boasts a $73 million servicing portfolio and over the past four years has funded more than $230 million in loans with investor capital.

After the 2009 financial crisis, hard-money lending carved a niche amid cash-hungry real estate developers and aspiring house flippers. That demand is still present: A 2015 report by Savills Studley, a New York-based real estate services firm, found that demand for real estate financing is rising, but banks aren’t loosening lending policies to meet the demand.

As investors demand alternatives to shield them from downturns in equities, maybe trust deed investing is a concept whose time has come.

Trust deed investors offer privately structured loans to borrowers, typically real estate investors who collateralize a property they plan on selling for a profit. The loans have short terms of usually two to three years and interest rates typically between 10% and 15%. Hard money rates are independent from the bank rate, relying more on market conditions. The rates sometimes approach the limitations of state usury laws.

Rajeev Kotyan became fluent with the product after co-founding Innovative Advisory Group, a Lexington, Mass.-based RIA specializing in wealth management and alternative investments, in 2008. The firm wasn’t focused on this loan type originally, but clients brought it to them.

“Very early on, our clients were investing in trust deeds,” Kotyan says. “That is where we came into the picture with these products.”

Now, Kotyan and his firm not only offer the investments, but also participate in trust deed opportunities themselves. In the past, single persons or entities have funded these loans, but more recently the loans have often been fractionalized among a group of investors.

For example, Newport Beach, Calif.-based CrowdTrustDeed.com is a peer-to-peer site that allows California real estate borrowers and trust deed investors to network. It was started by Sandy MacDougall in 2007 after he found that he was unable to keep up with demand from borrowers and investors for new properties to put money into.

“I was putting together brochures for investment properties, but by the time I would make phone calls or put the brochure up on the Internet, [the properties] would be sold,” MacDougall says. “Then I would get five-to-10 additional calls and it’s already gone. CrowdTrustDeed offers real-time access to buying and investing on a trust deed and an automated way to review all the related material. It provides a social element as well. If you like a trust deed, you can let your friends know.”

Since being founded, CrowdTrustDeed.com has placed over $40 million in loans from its investors, secured by more than $60 million in real estate. Borrowers and projects are screened before being made available to potential investors, who go through a registration process that ensures the projects’ suitability for them before they participate.

Hard money loans are typically structured with a lower loan-to-value ratio than conventional financing, which lowers the risk of loss in the case of default. Some companies like Ignite incorporate equity into the loan size, while others, like CrowdTrustDeed, are debt-only platforms.

Because trust deeds are private, collateralized loans, they aren’t subject to the many regulations constraining conventional loans, so the funds are available quickly to developers and house flippers demanding cash to buy and improve discounted properties.

“I think we play an important role because we finance people buying homes and assets that need value added,” MacDougall says. “It provides stimulus across construction and creates incentive for people to move. The benefits of home-buying and upgrading help local and state economies.”

Borrowers, usually construction companies, developers and land bankers, use the money for property acquisition, improvement and both commercial and residential development, says Clint Sanderson, chief operating officer of American Fork, Utah-based Nudge Real Estate.

“Real estate is all about capital and access to capital; the whole recession, the housing crisis occurred because of subprime mortgage lending,” Sanderson says. “That created a ripple effect and essentially banks stopped lending and it stopped everything. Without capital, there’s no development and no growth.”

Since it began operations in 2010, Nudge has sold more than 1,800 trust deed notes and funded more than $120 million in loans, selling to investors in the U.S., Canada, New Zealand, Singapore and Japan. Ignite, Nudge and CrowdTrustDeed have made a niche dampening the potential risks by bringing all of the necessary services to research the projects, write the loans and sell the investments under one roof.

But there are skeptics. Jeremy Hyndman, the founder of Investor Defense Law, a Los Angeles firm that helps investors bring claims against advisors and issuers, says that trust deed investments are illiquid, which makes them less appropriate for investors who need cash on hand.

“If you are in a bond fund, you can get in and out when you want as quickly as you want,” Hyndman says. “If you’re dealing with trust deeds, the market is small. Who else wants the first priority trust deed in this particular house in this particular town?”

But such illiquidity is one reason lenders keep the terms short, usually under five years. At Ignite Funding, the loans are often shorter, Robbins says.

“The terms are typically six to 12 months, like a six-month loan with an optional six-month extension,” Robbins says. “We write them that way because we usually split origination points between the time periods. Two points up front for the first six months, then two additional points for the second six months. If they complete the project in six months, they forgo the additional points. By limiting the terms, we’re adding a little liquidity to an otherwise illiquid investment.”

Occasionally borrowers’ projects don’t come to fruition. While investors ideally recover their money after foreclosing on and selling the property, there’s no guarantee that will be an easy or inexpensive process, nor is there any assurance the property will break even or profit at sale.

“The biggest risk with any type of real estate investment is that the market goes down again,” Sanderson says. “If the borrower defaults, that trust deed is underwater and you own a property potentially worth less than what you paid for it.”

If a project fails or a borrower defaults, investors may be on their own during the foreclosure process, Hyndman warns. “The fact that these pay a higher percentage indicates that these are higher risk products,” he says. “If they work, they provide nice income. If they don’t work, they can cause a lot of pain. They’re not something where you can walk away and say ‘lesson learned.’ It’s going to be something you’re stuck with in a while.”

All that means investors should be sure any property they lend on is thoroughly investigated, and that the progress of related development projects is monitored. “These become low-risk investments compared to your potential return,” MacDougall says. “Across 250 loans, we’ve had two defaults—one where the property sold and every investor was paid off and one where clients had half their expected return. Nobody lost money.”

While organizations like Nudge offer properties in several different markets scattered across the country to international investors, most trust deed investing is local. Ignite Funding works with properties in California and Nevada, while CrowdTrustDeed works with borrowers and investors in California alone. Innovative Advisory also keeps its trust deed business close to home, Kotyan says.

“We have tended to work with clients and borrowers in the New England area,” he says. “That restriction has not come by our choice. It has come from our clients’ choice. They like to see where they are investing their money.”

The firms say trust deed investing continues to grow. Ignite expects to enlarge its servicing portfolio to $100 million by March 2016, continuing a consistent 35% to 40% per year growth rate. Despite the expanding competition in the hard money lending market, Robbins expects that growth to continue.

“Things are starting to loosen up a little bit,” he says. “There are pension funds and smaller community banks who get into this space, but they are particular about what projects they fund. There’s always going to be a demand for this kind of lending. The process to fund a loan takes too long at a bank because they are worried about credibility of borrower, and that’s not going to change.”

And as long as the projects continue to deliver on promises of double-digit returns, Robbins should have plenty of investors to work with.