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Hard Money Loans and What You Need To Know Before You Apply for a Loan.
Hard money loans have been around for many years, but recently these types of loans and lending criteria have taken a forefront within the lending community.
First let’s start by explaining what a hard money loan is so that you may further understand what to expect and what to avoid if you’re considering obtaining a hard money loan.
A hard money loan is simply a loan that in most cases requires little or no credit worthiness of the borrower/s seeking the loan which would traditionally be underwritten by a bank in a conventional manner that results in very strict regulations such as an excellent credit rating as well as but not limited to excellent financials, proven experience for all principals involved, large down payments (35% or more) an impeccable business plan, and in some cases established business credit and in other cases the borrowers blood type (just kidding).
All kidding aside hard money loans are not a laughing matter, because of the loose lending requirements established by hard money lenders some hard money loans come at a hefty price for the borrower resulting in exuberant points, fees, and interest rates.
What most hard money lenders are looking for is a deal that makes sense and also a deal that has plenty of equity. Hard money loans are traditionally not long term loans, even though some lenders may make hard money loans with 5, 10, or even 20 year terms most hard money loans are termed out at 6-36 months.
It is imperative that you follow the steps detailed below before applying for a hard money loan:
1) Have a detailed “Executive Summary” which outlines the property, projected earnings, and exit plan.
2) Have a detailed ‘Business Plan” which outlines the principals’ experience (past and present pertaining to the venture you’re seeking funding for).
3) Have detailed “Financial Statements” for all principals’ including tax returns, articles of incorporation, and any document which may be helpful at obtaining the hard money loan in a timely manner.
4) Have the processing/due diligence/appraisal/
Make sure that you ask these questions below of your hard money lender or broker, such as:
1) How much are due diligence fees?
2) How much do “points” cost?
3) Is there a pre-payment penalty?
4) How much are the lender/broker fees?
5) How much is the interest rate?
6) Is there a balloon payment on the note?
7) What’s the closing time frame?
8) What are the loan terms (6mos, 24mos, 120mos, etc.)?
Hard money loans have been an interlace factor in helping people achieve their dreams of obtaining funding for commercial, industrial, multi-family, business expansion, and much more.
If you’re contemplating obtaining a hard money loan please feel free in reaching out to our firm (Strategic Consultants)
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Strategic Consultants is based on the belief that our clients needs are of the utmost importance. Whether you're seeking a loan for $100,000 or $100,000,000 Strategic Consultants will walk you through the process every step of the way.