Commercial Hard Money Loans

Commercial Hard Money Loans are real estate loans based primarily on the collateral. Real estate collateral is the protective equity in the real estate transaction, and is the primary factor in qualifying for a Hard Money Loan. These types of loans are typically provided by Private Lenders who are looking for sound transactions based on equity and not on credit scores.

Hard Money Loans are an option when a real estate transaction falls outside the parameters of conventional lending standards of banks, life insurance companies, and other sources of traditional loans. Conventional loans are based on the borrower’s credit and income, but credit and income are not primary factors with hard money loans. Banks have government regulations to contend with, where as regulatory red tape can be bypassed with Hard Money loans due to their origination being with Private Lenders.

Private Lenders, or Hard Money Loans, are a source of funding for:

* Property acquisition with little or no cash from the borrower.
* Short term cash for development, or to rehabilitate property.
* Investment capital instead of a business partner.
* Transactions that need to close quickly.
* Transactions that don’t qualify for conventional financing.
* Borrowers who don’t have the normal income documentation banks require.
* When other properties, or assets can be provided in tailoring a loan.
* For sound transactions that make sense to use this approach.

Being a Private Lender and not a bank allows the Lender to make quick decisions. It also allows the Lender to provide more flexibility in structuring the deal. There can be many advantages when working with a Lender that can tailor the transaction and make quick decisions.

** Benefits of using Hard Money Loans **

1. Easy Application Process - Private Lenders base their decisions on the current quick-sale market value, the purchase price, and condition of the property being offered as collateral.
2. Uniqueness of the collateral - special use properties and personal property, which are not acceptable to a bank, may be considered by the Private Lender.
3. Flexibility - Private Lenders have the ability to tailor the loan to meet the needs of the
4. transaction.
5. Seasoning - a property without a track record of payments can still qualify.
6. Quick Closings - since the property’s equity is the primary factor, less information on the borrower is required.
7. No Pre-payment penalties - Hard Money Loans are typically used for short-term situations.
8. Therefore, in many cases early payment of the loan does not penalize the borrower.
9. Pre-qualification - allows borrower to be a cash buyer.

Although understanding the benefits, what most borrowers consider the downside of Hard Money Loans is the interest rate.

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