As a business owner or investor, you have plenty of options for financing. Hard money is just one of them. While we appreciate the opportunity to provide hard money and bridge loans throughout Salt Lake City and the entire state of Utah, we get the fact that our loans are not always the best option. So, when should you consider using a hard money lender?
The appropriateness of hard money is almost always dictated by circumstances. There are times when only hard money will do. There are other times when business owners and investors are better off applying for traditional financing. There are no black-and-white criteria. The best we can do is offer a few suggestions.
When Time Is of the Essence
Among the many positive aspects of hard money lending is the speed at which lenders can fund loans. That being the case, our first recommendation is to consider using a hard money lender when time is of the essence. If you have only a few days or weeks to close a deal, you certainly don’t have enough time to wait around for a traditional lender.
The time-sensitive nature of commercial property transactions explains why the majority of our hard money and bridge loans go to investors. Property investors move at a pace completely unheard of in other circles. They require responsive lenders able to push paperwork through and get loans funded as quickly as possible.
A good hard money lender can usually get the job done in a matter of days. Here at Actium Partners, we have been known to close loans in under 24 hours. That isn’t the norm, but it is certainly possible under the right conditions. We get right to work so that our clients are not left hanging.
When the Competition Is Fierce
Competition in the real estate investment arena can be quite fierce. Especially now, when inventory is so limited, you might have multiple investors keeping an eye on the exact same property. If it looks like one is going to jump, the others will jump too. What is the result? The investor able to offer the highest price and the earliest closing date almost always prevails.
You may not be facing the time constraints of a 1031 transaction. You might not be looking at the possibility of losing a deal because your bank bails on you. But if you are facing fierce competition from other investors, you still need to get funding in order quickly.
When Banks Refused to Step Up
Hard money is often considered a lending option of last resort. Even though this is not the case, such sentiments stem from the fact that there are certain projects traditional lenders will not entertain. An investor could approach multiple banks and discover none of them is willing to step up.
We get it. As a hard money lender, we are approached all the time with projects we don’t want to get involved in. That is the nature of the business. Every lender has its own criteria.
At any rate, banks often will not step up to fund investment property deals. We will. In addition, some banks will not step up to extend a company’s current business financing. We might be able to help with a bridge loan. When banks aren’t interested, hard money is usually an option.
Hard money and bridge loans are ideal for certain circumstances. Are they right for your projects? As an investor or business owner, consider using a hard money lender when time is of the essence, you are facing fierce competition, or banks will not help you.
