If you need to get your hands on some funds to invest in property to run a business, hard money commercial loans can help you seal the deal. A hard money loan is a type of loan that can be secured by real property.
These are also known as short-term bridge or last-resort loans. Most people typically use their hard money loans for real estate transactions.
The best part is that the lenders do not have to be banks but can be businesses or individuals. Here is everything you should know about what hard money lenders are and how you can use hard money for financing commercial projects.
1. Fast Funding
One of the best benefits of hard money commercial loans is the fast and straightforward process. All clients need to do is fill out a loan application form that does not take long.
After conversing with a hard money lender about your application, you can be approved and funded faster than other loans. When you walk into a bank, you may need to fill out numerous loan application pages.
These applications can ask many personal questions that many people may need help remembering answers to. You do not need to go through such a tedious process when it comes to hard money lenders.
The game aims to secure funds quickly to ensure you can invest at the right time. Unlike traditional banks, you do not need to go through several days or weeks of anxiety before your loan gets approved.
After you approve your commercial real estate loan, you can expect to receive the funds in your account within a couple of weeks. Depending on your lender and their policies, this can be done even sooner. Check out PB Financial hard money lenders for more information.
2. No Perfect Credit Score
Most people get rejected for real estate loans due to their credit scores. If your bank does not see that you have a perfect credit score and income history, they may not approve your loan.
They can also delay your loan if you cannot prove that you have a lot of collateral or savings to make up for the low credit. And even then, it would be a long shot to get approved.
Credit scores can also affect a person’s life for a long time. Imagine not being able to borrow the funds you need because of a mistake you made years ago.
Unless you meet the bank’s criteria, they will not help you at all. This is where hard money lenders can be your best friend. Hard money lenders do not require many of these formalities because they are unlike traditional banks.
These lenders focus on the value of the property and the down payment you have invested as the borrower. Then you can expect your loan to be approved if a hard money lender is satisfied with the valuation and equity figures.
3. Make Stronger Offers
When you have hard money loans on your side to invest, you can make your investment offer much more robust. This is because most investors have bank loans from traditional lenders.
The downside is that these traditional banks are known for randomly pulling financing from buyers, especially during the escrow period when you must be on your best behavior to close the deal. If you do not want banks to kill the deal on your property investment, securing hard money real estate loans is the best decision.
4. Benefit From Quick Closing
Many real estate investors who pay with cash instead of working with a traditional bank mortgage can haggle for a significantly lower purchasing price.
They can also work with sellers to negotiate a shorter closing and escrow period. A seller offloading their property may want to secure quick funding, especially if they are relocating.
Instead of dealing with multiple agents and buyers’ offers that can fall through even at the last minute, sellers should prioritize those with hard money.
This is where buyers can benefit from getting their hands on some hard money loans to come off as the more affluent and stronger investor to win tough negotiations.
5. Use Leverage
When people buy properties with cash, they may be limited in the number of investments. Therefore, it is beneficial for investors to use hard money loans for real estate.
This way, they can get most of their financing without any hassles. You will have the money to secure properties and complete other real estate projects without worrying about the bank pulling the plug at any moment.
6. Get Additional Loans
Most traditional banks will only provide loans to a single borrower for a maximum of four times. This can be significantly limiting to someone who heavily invests in properties.
However, the good news is that hard money lenders do not have such limitations to follow. They mainly care about the equity you have in the property. So, you can still expect to receive loans even if you exceed the limit.
7. Reinvest Equity
You will have some options when you raise money to make a down payment on a property. For instance, you can refinance your hard money loans in real estate.
However, this can only be done if you have sufficient property equity to make lenders happy.
Remember that hard moneylenders focus more on property equity and valuation than people’s credit scores. If you have enough property equity, you should expect to get approved for a loan without any worries.
Apply for Hard Money Commercial Loans
Now that you know the benefits of hard money commercial loans, it is time to find the right lender for your property goals. Hard money lenders focus more on equity than bank forms and credit scores.
This makes them flexible because they do not share the same rigid rules as banks.
Even though hard money lenders also have their limitations, they are mild, and you can still get approved for real estate loans. If you enjoyed reading this commercial real estate guide, check out some of our other posts.
Personal loans generally have no restrictions on how the funds can be used. Borrowers have the freedom to allocate the money as they see fit.