Hard money commercial loans are known to give an alternative source of advance loan for commercial purposes for which mainstream funding is unavailable. Majority of the people who apply for these types of loans use them for intentions such as high-risk investments that require huge capital. Entrepreneurs utilize any opportunity they find in the market, but not once have they encountered financial restriction. Conventional banks limit their loans to particular levels, and that is the point that these hard money commercial loan lenders come in. Here is what you need to know:
The application process
Getting this type of loan has proved much simpler than the usual financial institutional loans. The lenders are a phone call away. What you need is to present your need with your credentials on the negotiation table. The lender’s interest is to evaluate your enterprise in terms of its ability to cover the loan. Their aim is usually to retain their capital and to get profits through the interest charged. The disbursement of the funds is quick as long as the agreement is reached.
The interest rates
The lender is aware that the loanee is engaging in a high risk business that few or none other financier can easily loan. He will therefore have the liberty to hike the interest rate as a monopoly in this field. This is however not meant to discourage the loane. The interest rate is also constant even if payment is done before the repayment period.
It is imperative to have collateral when or before applying for a hard money commercial loan. The lenders will hold onto that asset you provided as collateral to compensate for the loan in case loan repayment is declined.
Duration of loan
The loan period is always short –a rule of the thumb for these kinds of loans. The maximum duration of these loans will hardly exceed three years although they might vary with the lender. For new loanees, a short duration is assigned for the lender to assess your creditability status. Punctual repayment of the loan increases your loan limit as well as your credit worthiness.
The lender will be particularly keen on assessing your documented plans in the line of you sources of funds to successfully clear your loan. They often reference to Loan to value (LTV) that is how successful your enterprise is or how long you have been in business. The markers of such factors are such as favorable credit scores and preferable proceeds.