The common belief that hard money loans are the sole province of those with bad credit is a myth that should be discarded. Savvy commercial real estate investors know that, with the tightening of federal regulations for banks, oftentimes even the most well-planned projects and financial-strong borrowers get rejected, so hard money loans are an important tool in the real estate investor’s toolbox. Here are just a few of the myriad reasons that a borrower might need a hard money loan instead of one from a bank:

1. You have a quick escrow and need funds in a matter of weeks rather than months.
2. You want an application process with less red tape.
3. You have a recent foreclosure or short sale on your record.
4. You have a declaration of bankruptcy on your credit history.
5. You are self-employed or haven’t been at your current job long enough to meet the bank’s lending requirements.
6. You have a large number of investment properties in your portfolio.
7. You don’t have sufficient financial reserves for the bank’s lending requirements.
8. You represent a trust, LLC, corporation, non-profit, or other entity that will own the property.

Hard money loans are most often sought out by borrowers who need loans in a short timeframe because private capital lenders can usually approve a loan in a couple of weeks, especially if you have all of the required financial documents and information about the property ready to hand over when you request the loan. It’s important to note that the underwriting process for hard money loans is quite different from that of a bank or conventional lender because private lenders can establish their own guidelines rather than being required to follow those issued by the federal regulators. While private lenders are strongly associated with borrowers with bad credit, in actuality, it isn’t that these lenders will lend to just anyone, but that they will look beyond your credit score or lack of typical financial resources to consider the viability of your project and the reliability of your character. They have the ability to structure loans to fit people and projects rather than trying to force their borrowers to fit into specific boxes as bank lenders do.

If you have a project in need of private capital funding, contact Montegra at 303-377-4181 for more information about our various hard money lending programs to find out which one best suit your needs.