The Advantages of Hard Money Loans
Funding your business endeavors can be difficult. Loans from banks may not be easy to come by and the time frame may not work out. Luckily, hard money loans are an option. These loans, a type of bridge financing, offer clear advantages.
First, what is a hard money loan?
Hard money loans, often referred to as private money, are a short-term financing option. They can be seen as a bridge loan because they “bridge the gap” between long-term financing options. The loan is backed by property used as collateral. The property can be residential, commercial or even industrial. But, you can’t use residential property where you currently reside due to regulations. A borrow and lender will agree on the amount of the loan as a percentage value of the collateral offered. This is referred to as the loan-to-value ratio. It usually falls anywhere between 65 to 75 percent of the value of the property.
Less requirements and more flexibility
Hard money loans are a non-traditional type of loan and are offered by private groups or individuals instead of a bank. These lenders are far less concerned with large amounts of paperwork and your credit score, and much more focused on the value of the property used as collateral and your equity in that property. Also, private lenders may be willing to make some adjustments to the loan if it better suits both parties. If you need more time to repay the loan, this could be possible with private lenders. Banks and financial companies have a strict and difficult process to acquire a loan that could lead to you not receiving a loan. Banks are very unlikely to alter a loan’s structure if you run into any issues, as well.
Time is on your side!
Hard money loans can work in a very tight timeframe. If you need money fast to make an offer on a piece of real estate, lenders will fund your loan quickly. Traditional banks loans can take valuable time to be cleared, which can squander your opportunity. Banks can take over a month to fund a loan. Private lenders can process a request within a couple days and have the loan funded within a week! The term of the loan can last a few months or up to five years depending on your needs.
A hard money loan can be just what your business needs to succeed. Check online for your local lenders to see if a hard money loan is the right fit for you!