3 Reasons to Use Hard Money

While hard money loans do not take the place of traditional financing, they do occupy an important niche in the commercial real estate market by providing funding to borrowers with unique opportunities that don’t conform to a bank’s lending rubric.

1. (A) Quick closings. Loans from traditional lenders can take weeks, if not months, to underwrite. Private lenders have flexibility in their underwriting requirements which allow them to fund loans in a much speedier manner. Hard money loans and bridge financing can often be approved and closed in a matter of days, allowing the borrower to strike while the iron is hot.
2. (B) Credit issues. Banks have strict credit score requirements that they must abide by when approving loan applications, whereas private lenders can take a borrower’s character into consideration in addition to hearing the reasons for any low scores or other financial issues. Don’t forget that banks, by Federal regulation, must be a credit and cash flow lender, hard money lenders are basically an asset based lender.  Their underwriting standards are very different from traditional lending institutions.
3. (C) Property quirks. Is the property underperforming? Is it in a less popular location? Is it in need of renovation or rehabilitation? These are all situations in which a traditional lender might reject a loan application, but a hard money lender might be willing to approve it. Bridge financing and other private lending options can help a borrower obtain the necessary funding for improvements in order to reposition a problem property.

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.