Investment Information: Hard Money Commercial Loan Basics
First of all, what are the Hard Money Commercial Loan Basics? Essentially, it’s a non-bankable loan. This means that it’s a type of loan that borrowers cannot get approved for at a bank. Hard money loans are easier to obtain than traditional loans because they don’t require the potential borrower to have a good credit score and they don’t have any strict regulations. Also, hard money commercial loans close quickly which is another advantage for investors.
Who uses commercial hard money loans? Generally they’re used by borrowers who have impaired credit, borrowers with tax liens, or borrowers who need their projects to be funded quickly.
Why should you use Hard Money Commercial Loans instead of Traditional loans? Potential borrowers with a well-structured investment plan can still leave a bank empty-handed. This is because traditional lenders have strict regulations that prevent many borrowers from receiving financing. Hard Money commercial loans are based on real estate—the property serves as collateral. Basically, hard money loans are more flexible, easier to get approved for, and fast. The downside is that the interest rates are higher because the risk is higher for the hard money lenders.
Today’s real estate markets of California are growing quickly and hard money loans are frequently used to finance investment property. What you want to look for when choosing a hard money lender is experience, communication, fast processing, adequate capital, and flexibility. When it comes to trust deed investments and hard money loans, the lender will be more involved with your investments than a bank would.
Unlike traditional lenders, hard money lenders can offer real estate investors two-way communication. Traditional lenders may have strict regulations for potential borrowers but hard money lenders work with the borrower to find a loan that works for them. Because hard money lenders can negotiate the terms of the loan with the borrower, communication is an important aspect of the process.