The What, Why, and When of Hard Money Commercial Loans

Applying for a commercial hard money loan

 

A hard money loan refers to a soft loan secured by real estate collateral. These short-term loans are generally offered or funded by private capital investors rather than banks, conventional credit unions, or other regular financial institutions.

The length of repayment time often ranges from 12 months to 3-5 years as the loan terms rarely exceed five years. Like any regular loan, servicing involves regular monthly payments, including the gradually accumulating interest or the principal amount.

It’s crucial to understand that the amount of capital secured by a borrower through a commercial hard money lending process is typically determined by the real estate property’s market value.

Types of Property that can Qualify for Commercial Hard Money Loans

A prospective borrower can secure a hard money loan through any variant of the real estate, whether it’s a single-family residential, multi-family residential, industrial or commercial building. 

But commercial hard money loans are just limited to commercial real estate as collateral. Most hard money lenders prefer commercial real-estate space over residential real estate space. That’s because most of these lenders cautiously stay away from the residential real estate as strict rules revolve around them.  

Most commercial hard money lenders willingly process loans in 1st position. Fewer, bolder ones will deal with the paperwork and offer you a loan in 2nd position.

The Difference Between Hard Money Loans and Traditional Loans

The major difference between a commercial hard money loan and a traditional loan is that the former have terms of 6-18 months, while the latter is generally amortized over 30 years. Hard money loans have an interest rate that’s 4% - 10% higher than traditional loans.

Moreover, hard money loans are used for short-term investment projects, whereas traditional loans are often required for owner-occupied properties. Hard money loans are only backed by property as collateral, but traditional loans are backed by the borrower’s personal credit and the property.

What Hard Money Loans Pay For

Commercial hard money loan includes the cost of the property and the cost of renovation. It’s also known as a rehab loan because lenders require rehab cost estimates to be provided by the contractor who completes the renovation. Hard money lenders only approve expenses that increase the property’s value directly. So luxury items such as an extravagant swimming pool won’t qualify.

Commercial hard money loans are used by short-term investors

 

If you wish to apply for any commercial hard money loans, Global Capital Partners Fund can be your biggest helper. The company has helped many small businesses take control of their financial fate with the help of asset-based financing. Give them a call now and grow your business to its potential.

Comments

Post a Comment

Popular posts from this blog

3 Things To Consider When Applying For Private Lending

Image
  Whether you want to  invest in commercial real estate  or acquire a business, sorting out a suitable funding option is a must. Many business owners consider private lending to finance various projects. But with several money lenders in the market, it can be difficult to identify the best deal. Hence, we have compiled a list of the top three things to consider before applying for private lending. Global Capital Partners Fund is a reputable private lending organization that offers various financial solutions to businesses in Tenessee , Washington , Virginia , and many other states in America. The company is popular for asset-based lending , bridge financing , mortgage lending , and many other affordable financing options. Make sure to keep these top three things in mind while applying for private lending. 1.   Know The Interest Fees And Rate Private lenders typically charge higher interest rates than traditional lenders such as banks, so it's important to carefully r...
Read more

How Can Bridge Financing Help Your Business in Annapolis, MD?

Image
  A bridge loan  is a short-term financing option that helps businesses meet their immediate obligations before they secure a long-term finance facility. It is widely used by companies in the commercial real estate sector, where they need quick cash to take advantage of a lucrative real estate investment opportunity. Here's how you can use bridge loan financing  as a short-term financing solution for your business in Annapolis, MD.   Purchase Real Estate If you're looking to grow your business and want to purchase a new facility, bridge loan financing can provide you with the necessary financial impetus to help you with your purchase. Conventional financial institutions and banks have strict lending requirements for funding commercial real estate. They will conduct a comprehensive review of your financials, conduct property appraisals and inspections, and then provide you with approval.    Time is of the essence when securing a viable commercial space, and...
Read more

5 Real Estate Investment Challenges and How to Deal with them

Image
  Real estate investment involves the process of buying a property and then renting it out to generate income. The major concern during this process is the amount of money required for a particular property. This guide will discuss common challenges investors face in the real estate industry and how a lending company can help. Market Volatility A challenge that real estate investors commonly face is market volatility. Despite the tremendous real estate opportunities , uncertainty in the market due to multiple reasons makes the situation difficult for investors. However, this issue can be addressed depending on the investor’s strategy. For instance, they can opt for a stable investment opportunity rather than jumping into uncertain situations. Property Valuation Decision analytics before investing in real estate offers a comprehensive report, answering the investor’s queries and analyzing the potential risks. Poor property valuation prevents investors from ...
Read more