A hard money loan will become easier to get if you know what to expect and have answers to your lender’s most likely questions before you begin the process. These eight easy to do steps will assist both borrower and lender alike. Knowing these steps will help you prepare your hard money loan application so that it has a better chance of being approved.

1. Choose a project – Before asking for a loan, you need to decide what you want to use the loan for. Private lenders prefer borrowers who have experience, so if you can show them that you have a formulated plan that has worked before, you increase your chances of approval. If you don’t have experience, you’ll need to establish that you have a well-developed plan for your project.
2.  Find a lender – Research your lender before you apply for a loan. Choose a lender whose interests match the purpose of your loan.
3. Write an executive summary -This concise statement of your plan should include the amount of the loan request, the reason for the loan, a project timeline, any other investments you’ve already made to the project and your exit strategy to repay the loan. Provide the lender with detailed facts without getting wordy and show them that your loan will make them money not saddle them with a property they have no interest in owning. (See our blog on the 4 Cs for more on exit strategies.)
4. Fill out loan application – This should include a full and complete personal financial statements. A detailed and accurate summary of your finances will improve your chance of a successful approval. Lenders will be impressed (and surprised) by getting personal financial statements that are accurate and believable.
5. Include pictures of the property – Photos of the proposed investment as well as of the surrounding neighborhood will help the lender understand its comparative value. Expect lenders to send an appraiser to look over the property and assess it for reasonable gain but photos included with the application are a great help to get you to the next step with the lender
6. Is this loan to be used for rehab?  If so, provide a detailed rehab plan – This should include contractor estimates, timeframe and total costs, and establish the scope of work that you will undertake.
7. Show added value – Discuss in detail how your rehab plan will add value by increasing occupancy numbers and also allowing for higher rental rates. This is highly important information for your lender.
8. Illustrate your character – Your performance throughout the loan application process will highlight traits that may influence your lender’s decision. Simply keeping in touch, answering questions honestly, and presenting an organized plan and application demonstrate to the lender that you will be a responsible borrower. On average, hard money lenders only fund a very small number of the applications they receive.  By being candid and responsive throughout the loan application process, your chances of being approved will be substantially increased.

In addition to these steps, it is important to keep the 4 Cs in mind.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.