If you run a business you’ll know that making decisions in a timely manner is absolutely vital to staying afloat. Often, it’s important to have the money to back those decisions. However, unless you’ve been in business a long time or have built up a good stockpile of money, it can sometimes be tricky to get a lender to back you, especially if they have never dealt with you previously. So, what are your options when you need money fast? A hard money loan is one that many businesses will swear by.
Loans for Business
There is a proven gap in the market for small business loans, with a Harvard Business School study finding that more than 70% of small business loans requested were for amounts under $250,000. This size of the loan isn’t particularly attractive to big banks, hence businesses can find it difficult to get the credit they need, exactly when they need it.
The value of your business property is important to them. This is where you can gain some leverage for your loan. If you have a high-value asset, then you can borrow against that. This is mostly used for real estate transactions and real estate investors, however, if you have another business prospect that requires a quick cash injection, then you can use the value of your business premises as the way to borrow money.
Many start-ups use hard money as a way to get the capital they need. They will have a solid business plan and the proven market for their products but they need the hard money to get everything in motion. This is sometimes called a bridge loan. Hard money investors like these sorts of businesses as they can see the potential and often gain a long term client out of their initial investment.
The Difference Between Commercial Money Lenders and Banks
The good thing about commercial hard money lenders is that they take each application on a case-by-case basis. Most major lenders, like banks, have strict criteria and a set of rules that they judge each application by, but commercial hard money lenders are much more likely to look at the mitigating factors that would be overlooked for traditional loans.
They are not banks, but usually private investment companies or even individuals. They are happy to take risks because their interest rates are high – so they receive a good return, and if you default on the loan, then your property is your collateral. It’s completely win-win for them, although they prefer to build relationships with people who they can lend to over and over on a short term basis.
The Benefits of Borrowing from a Commercial Hard Money Lender
Commercial hard money lenders are more versatile, understand more about the business world and move quicker than other lenders. They know that a timely response is required – when you have seen an opportunity and need to leap on it, so there won’t be mountains of paperwork or decision-making time to endure when you deal with one.
The value of your business property is important to them. This is where you can gain some leverage for your loan. If you have a high-value asset, then you can borrow against that.
If You Need Money Fast
It may seem a little intimidating at first to seek a commercial hard money loan, but there is a reason that it is big business in America right now.
You can directly increase your financial power and streamline the process for yourself while doing so. It’s all a matter of making the right presentation and choosing the right lender.
Be careful of any serious red flags. When there is an opportunity to make money, you’ll find people willing to take advantage of that, and this is also true in the hard money loan market. Do your research and don’t fall for any “pre-payment” scams. Plenty of commercial hard money lenders will have entire portfolios that they can show you and a collection of satisfied clients.
As Jared Hecht, CEO of Fundera, says “You should really only sign on the dotted line for a commercial loan if you know you’ll have the cash on hand when it comes time to make the final payment.”
If you need a cash injection and have a business, then a commercial hard money loan could be the best thing that ever happened. Find a trustworthy firm and you’ll be amazed at how quick and painless the process is.