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.

  1. Borrower must present to the Lender a Project Description that is clear, concise, realistic, and honest.

  2. 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.

  3. Borrower must be experienced, cooperative, creative, flexible and confident in their abilities and the feasibility of the project.

  4. 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.

  5. 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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