Hard money loans don’t seem to get the same kind of attention as traditional bank loans. They are seen as somewhat of an outlier in many circles. That is not because there is anything inherently wrong with hard money. Rather, it is due largely to a misunderstanding of how hard money works.
The truth is that hard money loans are extremely beneficial to certain kinds of borrowers. Real estate investors looking to get property deals done quickly are a great example. Hard money gives them access to cash when they need it, making it easier to get those deals done in a timely fashion.
Hard money also works well for rehab and expansion projects. You might have a company looking to rehab its facilities and add new space. You might have another that wants to open a second location on the other side of town. Hard money loans can provide the necessary funding without having to go to the bank.
As hard money lenders ourselves, we can testify to the many advantages our clients have enjoyed by choosing hard money. Here are just three of those advantages:
1. Speedy Loan Approval
A fair number of our clients are real estate investors of one form or another. One day we might work with a developer looking to purchase a new piece of land. The next day we might discuss making a loan for purchasing a commercial property the client hopes to rehab and rent.
The one thing both of these clients appreciate is speedy loan approval. They can come to us with their financing needs and get an answer in a fairly short amount of time. Unlike banks that have extensive and time-consuming underwriting processes, we only need time to review a loan application and appraise the value of the property in question.
What takes banks weeks to do we can get done in days. Our speedy loan approval process gives clients the confidence they need to get deals done quickly.
2. Less Emphasis on Credit Score
We hard money lenders have different criteria for approving loans. We can apply different criteria because we are not banks. We are lending our own money rather than money provided by depositors. This gives us the freedom and flexibility to measure risk in different ways. This is borne out in how we look at credit score.
A client’s credit score has very little to do with whether or not we approve the loan. Credit score may come into play in determining rates and terms, but approval is a separate matter altogether. Our approval rests almost entirely on the value of the collateral being offered.
In short, we do not look at credit score as a determining factor for approval. If a client has the right collateral and a viable plan for making good on the loan, that is generally good enough for us.
3. Flexible Loan Terms
Hard money lenders offer yet another advantage in flexible loan terms. Again, we are not banks beholden to depositors. We are free to customize terms on a case-by-case basis.
We get the fact that every loan is unique. We understand that every client’s circumstances are different and, moreover, subject to change. Like most other hard money lenders, we go out of our way to be as flexible as possible. We write loans for each project individually.
Now you know at least three advantages of hard money loans. Suffice it to say that hard money might be a viable funding option for your next project.
