Hard money lending is sometimes labeled as a misconception originating simply from the naming of the loan type. While everyday consumers and investors may analyze hard money as being difficult to obtain, the reality is a hard money loan is accessible and can be one of the most beneficial investments made into a business or company.
When determining if accessing a hard money investment is right for you, first consider the hard money loan definition. A hard money loan is an asset based loan secured off of investment. Typically financed by private investors, companies, or families these loans often are accompanied by high interest rates but can be eliminated in a shorter time frame due to their availability and impact in the current market.
Unlike the implied term, hard money refers specifically to the rights of property owners willing to receive immediate funds based upon their acceptance to find money based off their current situation. Most commonly, hard money loans are accompanied by an increased interest rate to cover the cost of any mishap as they can be risky but often well worth it to secure necessary funding for immediate progress.
Three of the main benefits from hard money loans
, typically provided by private investors, over bank financed or backed loans include the following:
Early Payoff Penalties
One of the more notorious aspects from bank financed loans is the inability to pay off the debt prior to the term expiring. If borrowing money to start or keep a business up and running then why should the owner or lender be penalized for their success. Suppose a business owner borrows from a bank at a typical financial institution rate. They have 20-plus years to fulfill the obligation but business booms. The lender should not be handicapped for their success and then penalized for retribution. In almost all situations, hard money loans are more short-term and can be settled at any time if the money is available.
Quick Funding and Approval of the Loan
Banks require so much paperwork in order to secure a loan if you owned stock in the tree business you wouldn’t need their money. Pages upon pages of forms must be completed and then each is analyzed by not only the individual located in a bank cubicle but also corporate personnel and others to determine if you and/or your business is capable of receiving the funds. Checks and balances exist in the common financial institution as a safety measure but becomes extremely bothersome when attempting to progress your agenda. With hard money and privately financed loans, the wait time is minimized. This is not to say rash decisions are the norm but collateral provided is easily analyzed and a decision can be reached quicker when dealing with a private or hard money lender.
Flexible Term Limits
Just as applicants may be considerate to payoff penalties, the hard money lenders often are flexible in repayment. Original loans can be repaid without penalty given the nature of the borrowing and instead of being cemented into a fixed month to month payment program, borrowing from a private investor unaffiliated with the banking world can prove to be beneficial.
When getting started on hard money loans there are two main areas of focus to ensure the proper procedures are in place to secure a position at the table. These specific displays highlight a need for individual funding before a determination is finalized. All aspects and resources may need to be evolved in an effort to quickly receive money.
These two aspects include property value and terms. Where bank loans are typically for extended periods of time, hard money is usually repaid in just 12 months. However, terms can be extended but do not usually surpass a five-year span. Lenders, or the private investors, become more focused on the value as opposed to credit levels of the applicant. For these reasons, hard money can be more beneficial in regards to the warranted issues of the money lended.
Not only can hard money loans be used to circumvent credit issues but other opportunities also present themselves to be most influenced by these type of money issuances.
Relatively short term and the lender takes an ownership interest in the building. At the end of construction, the loan is repaid from the proceeds of a mortgage obtained on the finished building.
Similar to construction loans but land loans are riskier because any impending development will take time. The lender still maintains an interest in the land but it makes it easier for borrowers to walk away.
Fix and Flips
A term often associated with real estate investments describes precisely the premise behind its’ function. Investors and borrowers both determine a few significant remodeling projects can and will significantly increase the price of a property. However, borrowers need money fast and in the short-term in order to complete the renovations making hard money loans a primary candidate for this purpose.
Each of the previously described details allow borrowers to know more about hard money and the broad range of capabilities provided by such avenues. Further, the differing types of loans most associated with hard money lending provide feedback on occurrences that may fit precisely what you are looking for in a lending opportunity. Often better and more beneficial than typical bank loans and more targeted for the specific needs and a quick turnaround, hard money could be just the solution you need.
Come see the experts at COHI Capital Private Equity Lending
who can help you determine your needs and set up a beneficial plan immediately. They will decide what type of loan will work best for you after finding successful funding needs for over a decade. . A full detailed review of your situation can be completed in addition to resolution issues and monetary considerations. Request some additional information by contacting COHI today. Call 970-922-3277 or contact us
for a decision. Often these are made the same day and can be addressed depending on client needs and schedule.