If you’ve never used a commercial hard money lender before, it’s good to know some of the pros and cons involved. Here’s why it might be a great option for some investors and not the best option for others.
Hard money loans are loans that are secured with collateral, not with the borrower’s credit score or financial history, as is the case with banks. These lenders operate outside the typical regulations to which big financial institutions must adhere. This offers them several advantages over a traditional commercial bank loan:
● The Approval Process is Much Quicker. While bank loans can take 30 days to several months to come through, a commercial hard money loan can be approved and funded in days or weeks. Private investors can look over the project and make a decision; no need for complicated income verification or lengthy background checks.
● You Don’t Need Great Credit. Since the property is put up as collateral, your financial history, credit score and income aren’t as big a concern.
● Asset-Based Loans Are More Flexible. Commercial hard money lenders don’t have a one-size-fits-all approach. They can look at each transaction and judge its merits individually. This means the terms can be molded to fit the project.
● They’re Perfect for Flippers. These loans are designed to fund short-term projects with set goals, a solid budget and a completion date — all of which work perfectly with commercial flips.
Of course, these loans aren’t ideal for everyone. There are some drawbacks that might make them a better fit for some than others. For instance, hard money often comes with a higher interest rate than you might get at the bank. This can be anywhere from 1% to 10% more, depending on the project. In addition, the loan terms might be shorter. Whereas a bank loan could range from five years to 20 years, asset-based loans are usually in the range of three to 60 months. For flippers, this is ideal; for ultra-long-term investors, it might not be the right fit.
Look for a commercial hard money lender in Arizona? You’ve come to the right place. Level 4 Funding offers highly competitive rates, interest-only payments and flexible terms for multi-family, office, warehouse and industrial projects. Give us a call or send us a message to find out how we can fund your next project.
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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.