Commercial hard money loans are an alternative to conventional commercial loans. The lender is not a bank or other formal lender and the terms are substantially different from those of a traditional commercial loan. But commercial hard money loans do provide a good short term option if you have been turned down for a traditional loan or you need the money in a very short time frame.
When applying for a traditional commercial loan, you know that you will need to have good credit and no foreclosures on your credit history. But your credit is not as important when you are seeking commercial hard money loans. The reason is that a hard money loan is secured by the property value of the property that you are buying or some other type of collateral. The lender is primarily interested in the collateral value and its location. The interest rates on a hard money loan are higher and so are the fees that the lender charges so they are willing to take a little bit more risk on a borrower with less than stellar credit. As long as the lender can foreclose on the property or take possession of the collateral then they are assured of being able to recover their investment.
Because a hard money loan is secured with collateral, you might be under the impression that you do not need to make a down payment, but that is not the case. You will never find a lender who is willing to finance the entire cost of a property. All lenders require instant equity to ensure that they will be able to recover their entire investment in the event of a foreclosure. And because commercial property values can be volatile, you will likely need to have a down payment which is as much as 40%. The terms can vary greatly because most hard money lenders are individuals and the loans are not regulated in the same manner as a bank loan.
As with any business, there are some legitimate businesses and others that are scams or rather shady. You should complete your due diligence with any lender including a hard money lender. Never pay any fees to have a lender look at a property or consider financing a deal. This is a sign that they are not legitimate. Also, any lender who is willing to finance 100% of the cost of the property is likely to be a fraud. In most cases you will be charged a few fees for processing and maybe even a property appraisal but you will never see a loan document or the money that you need.
As with any business deal it is important to know who you are doing business with and what the terms of the deal are. Spending some time to learn about the lender and the process for a legitimate hard money loan will help you to select a reputable lender and sign a deal with terms that will work for both you and the lender.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.