In the world of financing, traditional mortgage companies run like the fast and loose crowd at a high school dance. Hard commercial money lenders are the hard-to-get ones, those who were too cool to even come to the dance.
If you need to find hard money commercial lenders, just know: they will not come looking for you.
Hard money commercial lenders typically are in a great financial position. They have deep pockets and vast reserves, and they do not need you to stay in business. They will not court you or coerce you.
However, you may need them.
Plainly put according to retipster.com, a hard money loan is a “short-term loan secured by real estate” and “funded by private investors as opposed to conventional lenders such as banks or credit unions.”
Slow and Tedious
Traditional lenders will require stacks of paperwork and documentation. They base their decision on how much to lend you based on your risk. What’s your credit score? What is your income? Your assets?
Because of the amount of data a traditional loan company requires, they take a painfully long time to decide if they will approve your loan.
Fast and Furious
Hard money commercial lenders work in a completely different way.
They gauge their decision to lend based on your assets, on the property that you’re putting up for collateral. This means if you default on the loan, you will lose your property unless you can sell it and pay back the lender.
Because they do not require documentation paperwork, or the research that involves your income, hard money commercial lenders approve or reject loans quickly.
Who Needs a Hard Money Commercial Loan?
If you have any amount of credit problems from the past including foreclosures and bankruptcies, you’re a candidate for a hard money commercial loan.
Bankruptcy and foreclosures are red flags for traditional lenders, warning signals that will put the reject stamp on your application almost immediately.
With commercial lenders, if you have the assets or property to make up for the loan you’re asking for, they will usually approve the loan because they know that one way or another, you must pay them.
With a typical loan, if you default, you can, in the worst-case scenario, file for bankruptcy. When you file for bankruptcy, your lender may or may not get paid.
Be aware though, that if you’ve filed for bankruptcy in the past, you cannot do this again if you cannot make your payments. The hard money commercial lender will foreclose on your property, and you will lose the asset.
Why Get a Hard Money Loan?
If you want a short term loan, a hard money loan makes sense. House flippers, those who fix and flip homes, and thus own property for a short time, are great candidates for a hard money loan.
People who cannot obtain a loan through traditional means because of poor financial decisions in the past are also great candidates. Perhaps you’ve made decisions that have followed you for decades. You have your act together now, and you can make your payments, but still, no one will lend to you.
Meet the hard money commercial lender, the one at home playing hard to get.
However, hard money loans are expensive. Their interest rates typically range from 10 to 15 percent, depending on the lender and his location. Current mortgage rates, however, rise no more than six percent.
Because of the interest rate, a hard money commercial loan works well in the short term. If you plan on needing a long-term mortgage but cannot secure it at this time, then use the hard money commercial loan, but consider refinancing once your credit score goes back up and you’re a good risk
Where Can I Find Hard Money Commercial Lenders?
If the hard commercial lender is playing hard to get, how can you find them?
Networks dedicated to connecting apt candidates to these elusive lenders can connect you to a variety of potential lenders in multiple states in the United States. So whether you live in Alaska or Texas, if you look, you’ll find the lender you’re looking for.
To learn more about hard money commercial lenders and their services, check out our blog.