Astute business people know when their business is losing money they have to intervene before their business fails. Sometimes though, they don’t have the credit to take out a loan with a traditional commercial real estate loan. They may not have a significant amount of assets either. Fortunately the property they already have—their business—is usually enough for a Arizona Hard Money Lender.
Banks won’t touch a risky commercial loan—Arizona Hard Money Lenders will. This is why the interest is a bit higher when you take a loan through a Arizona Hard Money Lender. They are taking a large risk. Typically, Arizona Hard Money Lenders will charge anywhere from 9%-13%—whereas, a bank will charge closer to 7%.
Hard money commercial lenders primarily use the property as the security of the loan. In the chance that the borrower defaults on the loan that property can be foreclosed upon and the lender can sell the collateral. This is not what the lender wants to happen, but a loan has to be secured in some fashion.
Most commercial hard money loans are short-term loans—ranging from one to three years. The majority of the loan life is around one year. However, Arizona Hard Money Lenders have the flexibility to negotiate—unlike traditional banking institutions.
As you research lenders there are a few things to pay close attention to in your contract. Be cautious of exit fees. An exit fee is a large fee that is charged to the borrower when the loan is paid off. Make sure the lender won’t charge a prepayment penalty—these are also known as prepays. These penalties arise when the borrower pays the loan off too early.
Also watch for high dollar late fees on the balloon payment. The balloon payment is a large payment due at the end of the loan. Instead of making the same monthly payment in hard money loans, you pay only the interest until the end of the loan. On the final payment date you will pay the loan in full. This is how Arizona Hard Money Lenders work, however make sure the last payment is one you can afford and are prepared to make. Some lenders will include an enormous late charge on the balloon payment—be sure you are clear about any late charge amounts with your lender.
Hard money loans aren’t just for business owners losing money or with bad credit. Commercial hard money loans can be an excellent option for your business growth. Your collateral can be just as valuable as your credit as you grow your business into a successful and profitable endeavor.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.