There’s a certain connotation associated with commercial hard money lenders. The reality is, there are certain times when it’s way more advantageous to approach an HML over a bank.
Google auto-suggest is supposed to be smart, but it does something really stupid when you start running searches for “commercial hard money lenders.” No joke, the search engine giant will automatically append “are bad,” to the end of the phrase and offer it as a leading choice. That’s because people are actively searching for reasons not to work with HMLs, but it’s not why you’d think. It’s because people see the terms that they’re offered and start looking for a catch. There’s no catch. There ARE times HMLs are better than banks. A few are outlined below.
1. They finance when banks won’t. Most people don’t discover alternative lending until after they’ve been denied by a bank. Whereas banks have a whole list of criteria they use when evaluating a person’s creditworthiness, HMLs are more interested in the quality of the investment and the structure of the deal. They fill gaps left behind by traditional lenders.
2. They know your niche. Each HML chooses his niche and it’s typically based on the business experience he has. In other words, you’re getting funded by someone who has done what you’re doing. That means the person genuinely understands how your niche works and how to evaluate a good deal within it. Banks don’t usually get that in-depth.
3. They can get you your money quicker. There’s a lot of competition for investors in the commercial space. If you don’t have cash ready to go quickly, opportunities vanish. HMLs don’t have to deal with the same level of red tape others do, and so you can get cash in hand in a matter of days, versus the weeks or months it takes to get financing through traditional channels.
Even though the programs and terms offered by commercial hard money lenders versus banks differ in many ways, the security is matched. For example, there’s still a title process, escrow accounts, and legal protocols to follow. Borrowers have a great deal of protection. The biggest difference is that you’re using an asset as collateral, which is the same thing banks often do when their traditional packages fall short. However, HMLs have greater flexibility because it’s usually one person or a small group of people making decisions as opposed to following rigid corporate protocols. That’s the very thing that gets deals off the ground quicker too.
Whether you’re planning to work with commercial hard money lenders or anybody else, it’s important to talk to a lending expert who can walk you through the best options for your situation. A broker can help ensure you have clear expectations going forward and make sure you’re getting the best rates possible, so it’s easy to decide the best way to borrow and feel confident in your decision.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.