If you have done much real estate investing, then you are probably familiar with the excessive rigmarole required by traditional lenders for loan requests, quite often only to have the loan denied in the end. The tight restrictions that are currently in place mean that even creditworthy borrowers submitting applications for projects that have steady cash flow and exceptional ROI potential are being rejected by banks and other traditional lenders. With such circumstances becoming the rule rather than the exception, commercial real estate investors are looking for alternative funding sources, and hard money loans are an important alternative to make sure that you don’t overlook because there are many advantages over traditional loans.

Advantages of Hard Money Loans for Commercial REI

1. Out-of-the-bank lending opportunities. Private lenders are more willing to consider unconventional deals that require flexible or creative funding. They also have the freedom and versatility to structure loans to fit projects instead of trying to force a project to fit a particular loan program.
2. Lending and real estate knowledge. Private lenders typically specialize in a particular geographic area and keep apprised of local real estate trends in addition to having expertise in lending and business matters. This personal knowledge means that they are more likely to recognize a good commercial real estate investment project than a bank lender just ticking off boxes on a checklist.
3. Fast response times. Unlike bank lenders who have you dealing with a middle-man, private lenders meet with you directly, so you are presenting your loan request to the very person who will accept or reject it. This speeds up the process considerably, so that even though private lenders require much the same information as a traditional lender, they are able to review your application and get back to you with a decision much more quickly.
4. Legal security. This benefit is one way in which hard money loans do not differ from traditional ones because they are similarly investigated and documented. Security for both lender and borrower is provided through title searches, escrow accounts, and other legalities, so both parties can rest assured that their interests are protected.

The versatility, knowledge, direct response, and security that private lenders offer with hard money loans make them an exceptional alternative source of funding for commercial real estate investors who want to be able to act on opportunities quickly, not merely a source of last resort for desperate borrowers with bad credit.