One of the more common exit plans among our clients is arranging traditional financing at some point down the road. But that begs an obvious question: if you are going to the bank anyway, why get a hard money loan at all? Answering the question will give you some clues as to why so many of our clients prefer hard money as a first line of financing.

A Word About the Exit Plan

Hard money loans are typically structured as interest-only loans. Bridge loans are the same deal. Borrowers pay interest with their monthly installments, then pay the principal with the final installment. While the interest-only structure means lower monthly payments for borrowers, it also creates an extra risk for lenders.

To mitigate some of that risk, we require that borrowers present a reasonable exit plan at the time of application. An exit plan is the borrower’s strategy for repaying his loan on its maturity date. An exit plan needs to be reasonable and likely to come to fruition in order to pass muster.

This takes us back to the idea of offering traditional bank financing as an exit plan. But if a borrower is planning to go to the bank, why does he need a hard money or bridge loan from us?

We Work More Quickly

Borrowers come to us for a variety of reasons. Most importantly is the speed at which we work. We can approve and fund a typical hard money or bridge loan in a matter of days. Meanwhile, traditional lenders require several weeks at least, sometimes months.

Many of our borrowers are real estate investors. They cannot afford to wait for months. Waiting that long means jeopardizing the most lucrative investment opportunities. Instead, investors need to be able to close quickly.

We provide fast cash that gets deals done. Then, while making monthly interest payments, the borrower has an opportunity to obtain traditional financing. He is not under the pressure of closing a lucrative deal on time. He has several months to work with.

Some Projects Make Banks Nervous

Another reason borrowers come to see us first is that banks can get nervous with certain types of projects. We will not get into why. It is enough to know that a bank might not fund the acquisition of a targeted property even though it will go along with refinancing it later.

A borrower in such a position might call on Actium Lending to fund the acquisition. Months later, after the property is stabilized and generating significant revenue, he can go to a bank that is much more willing to consider refinancing.

What it boils down to is the fact that the bank wants to see evidence of a worthwhile investment. We help the investor generate that evidence by funding acquisition upfront. After a few months, the borrower’s bank is satisfied and agrees to refinance.

Hard Money Is Different

Any new investor coming to Actium Lending after traditional financing doesn’t work quickly realizes that hard money is different. Our hard money and bridge loans meet needs that traditional financing does not. That doesn’t make hard money better than traditional lending. It’s just different. Because of what we can do as private lenders, we give borrowers financial opportunities they cannot access in any other way.

Rest assured there are valid reasons to apply for a hard money or bridge loan, even with plans to refinance with traditional lending later on. We deal with lenders in that very position all the time. We provide fast cash that gets them where they need to go until traditional funding is available.