Your typical bridge loan or hard money lender is willing to entertain any inquiry, within reason. At Actium Partners, there are those opportunities that interest us more than others. There are also opportunities we will never look at beyond the initial inquiry. We are not alone. Private lenders across the country are very discriminating about who they work with. That is why we encourage borrowers to seriously consider whether hard money is right for them.
Our deals focus mainly on real estate investments, business opportunities, and debt restructuring. Other hard money lenders prefer to put their funds into other types of projects. One way or the other though, the borrower still has to figure out if hard money is the right way to go.
If you have been wondering whether hard money is right for you, there are five questions you can ask yourself. The answers to those questions will help you determine whether to inquire with a hard money lender or look for other means of financing your project.
1. Why do I need the money?
Right off the bat, ask yourself why it is you need the money. You can look at this in any number of ways, beginning with what you will actually spend the money on. If you are looking to invest in a piece of commercial real estate, we might be able to help. If you’re looking to fund a project that hard money lenders do not typically get involved in, hard money isn’t for you.
2. How much skin will I have in the game?
Like traditional lenders, hard money lenders work on the loan-to-value principle. In other words, we only loan a certain percentage of the total value of your collateral. That means you will have to put some cash into the project yourself. You will need to have some skin in the game. Not having enough for a considerable down payment suggests that hard money isn’t your best bet.
3. How much is my collateral worth?
One of the big differences between hard money and traditional financing is collateral. Hard money lenders make approval decisions based primarily on the value of the collateral being offered. If your collateral is more than enough to cover the amount you want borrow, there is a good chance your loan will be approved.
4. What time frame am I looking at?
Perhaps you are considering hard money because you are up against the clock. If so, you are not alone. A lot of the loans we make go to borrowers unable to wait on the lengthy bank process. They come to us because we can fund their projects much more quickly. If you are up against the clock, hard money might be just what you need.
5. Can I live with shorter terms?
A hard money or bridge loan is typically a short-term loan requiring repayment within one to two years. Our industry can be flexible when necessary, but it’s rare for a hard money loan to have terms exceeding two years. So ask yourself if you are able to accommodate shorter terms. You are not going to get a hard money loan with a 30-year term.
Hard money and bridge loans are fantastic tools for certain kinds of borrowers. They are not right for everyone. Moreover, hard money lenders are particular about who they work with. If you are considering requesting a hard money loan, we invite you to do your homework first. If you still believe hard money is right for you afterward, by all means contact us.
