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Hard Money Basics
Even a borrower with flawless credit or steady cash flow may on
occasion be willing to pay a premium to obtain a hard money loan if
they are under time constraints and can't afford to wait for a
traditional lender to gather up all verifications in order to close
escrow.
The term Hard Money Loan, as it is referred to in the commercial real
estate and lending business, has a several meanings stemming from it's
root, "Hard Money", meaning cash money. A Hard Money Loan begins with
a general meaning related to a loan for hard cash. However, the
meaning has developed through the years to include non conventional
real estate loans (privately funded loans, second trust deeds and
equity loans) such as, those loans one might get from a hard money
broker. Usually, a loan where the lender can approve the real estate
loan request, based on real estate equity or collateral.
The Hard Money Loans of today are those loans usually funded at a
higher cost to the borrower in exchange for the ease of obtaining a
fast cash type no-red-tape loan. This type of loan can be used for
your needs as long as there is equity and, or, collateral.
Here are some of the first things a lender will ask you for when you
are trying to obtain a Hard Money Loan or any type of loans.
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Borrower must
present to the Lender a Project Description that is clear, concise,
realistic, and honest.
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Project must be
feasible, have no title or environmental risk, and have a realistic
exit strategy. Project profitability must be significant enough to
support current and/or back end costs of the loan based upon
conservative operating assumptions.
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Borrower must be
experienced, cooperative, creative, flexible and confident in their
abilities and the feasibility of the project.
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Borrower must not
be insistent on terms, and leaves the Lender to their own good
judgment to make the best possible offer relative to their risk in
the project.
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Borrower must be
able to comfortably and willingly pay the Lenders actual Due
Diligence cost and all closing expenses, including necessary 3rd
party reports.
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