Hard money loans and bridge loans are two terms used to describe the types of private loans we make. There is a third term that is not used so often: ‘rescue capital’. The truth is that rescue capital is hard money offered to help a borrower after their original lender backs out. We see such scenarios more frequently as inflation continues, economic pressure builds, and real estate markets start to shift.
Rescue capital is part of our private lending strategy in Colorado. We work with real estate investors in the Centennial State, investors looking to get in on the action in a number of local markets that have flourished since the end of the COVID pandemic. But what if an investor secures an acquisition funding package only to have the lender back out at the last minute? It is time for rescue capital.
A Real World Example
Allow us to offer a real-world example that illustrates how rescue capital works. It involves a hard money loan we made to a Utah client a couple of years back. That client called us in a panic because his lender had backed out just three days prior to him closing on a multi-family apartment property. Closing was scheduled for Monday morning.
It doesn’t matter whether an investor is attempting to buy property in Colorado or Utah. If he cannot get to closing on time and with cash in hand, he loses the deal. That is exactly what this particular client was facing. He needed a hard money loan to facilitate closing on schedule. After that, he would work on conventional financing to pay back what he borrowed from us.
As it turns out, we were able to approve his loan prior to the close of business on Friday. We forwarded documentation and funding to the title company on Monday morning. Property rescued; problem solved.
Why Lenders Back Out
Discussing rescue capital at length leads to a question: why do lenders back out at the last minute? Unfortunately, the question is easier to ask than answer. We suspect lenders have a variety of reasons for backing out. There is no way to know for sure without asking.
It could be that a lender decides the property in question carries too much risk. Lenders are risk averse, as you know. Furthermore, economic slowdowns tend to make lenders more nervous. This is why it is not so unusual for us to come alongside Colorado investors with rescue capital. It has become more common for primary lenders to back out.
The thing is that losing your primary lender doesn’t have to scuttle your deals. A private money lender like Actium Partners can almost always get something done in time to get to closing. If nothing else, hard money is fast money. Closing and funding in a matter of days is the norm for our industry.
Opportunities Are There for the Taking
We have been looking into Colorado investment opportunities for a while now. From our point of view, the opportunities are there for the taking. If you have your eye on the Centennial State but are worried about financing, let us help set your mind at ease. Hard money and bridge loans are available for your investments in Colorado.
Do not let the fear of lenders backing out stop you from taking advantage of a strong Colorado market. If you run into trouble, rescue capital can save the deal and get you to closing on time. So go ahead and work your magic. Start building your Colorado portfolio using hard money as your first funding source.
