The name “hard money lender” can sound harsh or scary, bringing to mind intimidating loan sharks from gangster movies but, in reality, hard money lenders are just small business owners who want to finance small-balance, short-term commercial real estate investment opportunities. Another way to think about these private capital lenders is as “story lenders” because they are interested in hearing the story behind your loan application and working with you to customize a financing solution to fit your situation.

Private capital lenders aren’t bound by the same guidelines and restrictions as banks and other traditional lenders, so they have the freedom to consider each borrower’s unique financial situation and underwrite deals based on their own experience and knowledge of the local market and industry. To understand the difference between traditional lenders and private capital, or story, lenders, think about a high school student who is applying to university. Bank lenders are like a university that only considers a student’s SAT score, GPA, and transcripts to make their admission decision, whereas a story lender considers all of that but also looks at the student’s essay and resume of extracurricular or volunteer activities. In other words, the bank looks at a borrower as a piece of paper with numbers that either do or don’t fit inside the boxes on a loan application form. However, a private capital lender looks at the borrower as a person with a story to tell about why they want this loan, why they want to purchase this property, what their vision is for this project, and how they plan to make it all a reality. It’s important to remember that most story lenders are essentially small business owners themselves, so they understand the challenges and obstacles that small business owners face in ways that big banks simply can’t.

As a borrower in search of a hard money or private capital loan, it is your responsibility to become (or acquire) a storyteller. You can do this in four ways: crafting an effective loan-submission summary (this is also called an executive summary; to find a more detailed blog on how to write one, click here ); describing and documenting your prospective property in as much detail as possible; providing explanations for any irregularities with the property or your credit history; and explaining what your business does, how it’s doing, and how this acquisition will help it grow. The most important part of telling your story is to make sure that it makes sense to the lender and that you are transparent and upfront about any issues. Story lenders not only want to hear your story, they need to hear it to create the financial solution that is just right for you.

If you have a loan story to share, contact Montegra at 303-377-4181.