By far, the most common reason that experienced investors use hard money or private capital loans is for deals that need to close in a timely, efficient manner. It can take months to close a traditional commercial mortgage with a bank lender, whereas a private capital or hard money lender can supply the necessary funds in a matter of weeks (in some cases, the turnaround can as short as one week). Experienced investors know that time is money and that the more time it takes to get your money the less likely it is that you’ll be able to secure your deal.

Private lenders have three main business practices that enable them to provide timely, efficient service and close loans with expedited turnaround times:

1. Speed. A reputable private lender will respond to loan requests within 24 to 48 hours and can typically fund most loans in two to four weeks. This timeframe can be shortened in some circumstances if the borrower provides all the necessary documentation for the loan application upfront as this can speed up the underwriting process for the lender if they don’t have to request additional information.
2. Flexibility. Private lenders are free from federal oversight, so they can structure their loans to fit the deal and the borrower rather than forcing the borrower to fit inside preset requirements and guidelines that make the deal more difficult to realize.
3. Minimal red tape. Although private lenders will often require the same kind of information and documentation as a bank lender, they don’t have to report to a committee or any other decision-maker. A reputable private lender has control over the funds they can lend, so you can deal directly with the person who decides whether or not to fund your loan rather than a broker or a middleman. (If you encounter a supposed private lender who doesn’t seem to have control of their own funds, it can be a red flag that you’re actually dealing with a broker masquerading as a lender.)

The other advantage that a hard money or private capital loan has is that it essentially functions as an all-cash offer for the seller, so it can work in the buyer’s favor during the bargaining process.

At Montegra, these business practices are part of our five core values. If you have questions about closing a loan by the end of the year, contact us today at 303-377-4181.