Actium Partners believes in the power of hard money to help investors and business owners achieve their financial goals. The thing about our industry is that so many people misunderstand it. For example, it is common for first-time borrowers to be surprised by the fact that hard money lending is based on assets rather than people.
Asset-based lending’s primary focus, for approval purposes, is the asset a borrower puts up as collateral. Most of our loans go toward real estate purchases. The properties being acquired act as collateral for their respective loans. Conventional lending is different. It doesn’t focus on assets per se, it focuses on the borrowers themselves.
You Can See It in the Paperwork
The differences between a property- and person-focus are easily seen by looking at the paperwork requirements of both types of lending. Submitting a hard money loan application for a real estate transaction would require very little paperwork. A borrower might have to submit:
- A purchase agreement.
- A title report.
- An appraisal, if available.
- Copies of existing leases, if applicable.
By contrast, purchasing that same piece of property with a conventional loan could mean submitting dozens of different documents. Commonly requested documents include pay stubs or other proof of income, employment information, tax returns and W-2s, bank statements, and more. And that is in addition to the purchase agreement, title report, etc.
It goes without saying that documentation requirements vary from one lender to the next. With both types of lenders, some require more documents and others less. But in nearly every case, a hard money lender’s paperwork requirements will be far fewer.
It’s the Value of the Asset
The value of the asset in question is what really matters to hard money lenders. Lenders want to see that the asset being offered as collateral has enough value to cover the amount being borrowed. It is really no more complicated than that. If the value is there and the borrower has the required down payment, the chances of being approved are pretty high.
Conventional lenders do business differently. The way their business model is set up requires them to focus more of their underwriting attention on the person applying for the loan. That is why they ask for so much documentation. The way conventional lenders do things isn’t wrong; it is just different.
Fewer Documents Equals Faster Funding Through Hard Money Loans
There are plenty of reasons to appreciate the fact that hard money loans don’t require as many supporting documents. Off the top, fewer documents mean fewer headaches for you. You spend less time answering document requests and more time making plans for what you will do after your loan is approved.
Speaking of loan approval, fewer documents generally mean faster funding as well. Why? Because you spend less time putting together and submitting documents and we spend less time reviewing them. It adds up to a win-win on both sides.
It doesn’t take long for hard money lenders to review applications and documents. It generally doesn’t take long to get an appraisal on the property offered as collateral. Once those two things are done, the rest is a matter of formality. We prepare the loan documents, get your signature, and fund your loan. It is all pretty straightforward.
If you forget everything else about hard money, remember this: a lender’s focus is on property and not the person applying for the loan. That is the biggest difference between what we do and what conventional lenders do. We are all about the assets. If that sounds attractive to you, get in touch with Actium Partners.
