Soft deposits are not going anywhere.
Sellers will keep demanding them before they can take a property off the market or allow due diligence to commence. And buyers will increasingly compete for deals by offering to pay higher EMD amounts.
Consequently, CRE sponsors who don’t want to tie up cash in escrow accounts must explore other ways to raise soft deposits for commercial property. More importantly, they need to find a consistent source they can rely on for multiple deals.
In what follows, we consider the five top ways to fund a soft deposit for a CRE deal in 2026.
1.Partner funding
Some sponsors raise soft deposits directly from a limited partner (LPs) before closing. The LP who offers to pay the soft deposit may be compensated with priority returns, a co-GP position, or a higher equity share.
Partner funding is common when sponsors pursue larger deals that require higher EMD amounts.
Pros of partner funding
- Ideal for larger soft deposits
- It’s an equity funding method, so there’s no repayment
Cons of partner funding
- Slower process
- May reduce flexibility if the deal changes
- Not ideal for highly competitive timelines
When do sponsors consider partner funding?
They are best used when there is a strong, high-trust investor relationship and investors can move quickly due to existing trust.
2.Line of credit
CRE sponsors with established lending relationships with financial institutions often have a business line of credit they can explore up to a given funding limit.
A line of credit is reusable across multiple deals as long as the sponsor keeps repaying.
Pros of a line of credit
- Easier to scale
- Faster access due to preapproval
Cons of a line of credit
- Requires existing credit relationships
- May involve collateral or guarantees
- Slower approval for new sponsors
When do sponsors use a line of credit
Credit lines are more popular among sponsors with established lending relationships with financial institutions.
3.Private money loans
Sponsors can also raise soft deposits by taking loans from private lenders. These are usually short-term, relationship-based loans that are easily available to investors who belong to strong communities.
Pros of private money loans
- Flexible terms
- Faster access
- No collateral
Cons of private money loans
- More difficult to scale
- May require personal guarantees
- Relies heavily on network strength
When do sponsors use private money loans?
Private money loans are popular in mid-market deals where relationships and networks are important. Sponsors also prefer them to partner funding when flexibility is key.
4.Hard money loans
Hard money loans are short-term loans that are backed by collateral. The availability of a hard asset is prioritized over the borrower’s income, credit score, or experience.
Pros of hard money loans
- High approval rate
- Faster access to funds
- Useful for complex or non-traditional deals
Cons of hard money loans
- Higher interest rates and fees
- Not usually structured for soft deposits
- Usually requires collateral
When do sponsors use hard money loans
Hard money loans are particularly useful in time-sensitive or opportunistic deals, where securing the asset quickly outweighs the higher cost of capital.
5.Specialized EMD financing
These are companies that specialize in funding EMD for a variety of CRE deals.
The best soft deposit providers for CRE offer flexible solutions that match the needs of CRE sponsors.
Pros of specialized EMD financing
- Fast approval
- Quick funding
Cons of specialized EMD financing
- Limited to verified deals
- Requires PSAs with clearly-defined contingencies
When do sponsors use specialized EMD financing
CRE sponsors prefer specialized EMD financing when they need to pursue multiple deals at once, move faster than competitors, and design flexible terms.
For example, with Duckfund, you can pursue multiple simultaneous deals, propose higher EMD amounts in competitive markets, and get funds sent to escrows within 48 hours.
Soft deposits are no longer just a formality; they’re a competitive lever. Sponsors who can fund deposits quickly and efficiently can win more deals, scale faster, and preserve capital for higher-return opportunities.
Though there are many opportunities to fund soft deposits, specialized EMD financing companies provide the most advantages to CRE sponsors. Their flexibility makes them the partner that CRE sponsors need in competitive CRE markets.
