In today’s dynamic business and real estate investment landscape, the availability of fast and flexible financing is frequently the key to success.
That’s where hard money loans come into play.
Hard money lending is a type of financing that allows borrowers to secure loans based on the value of real estate assets rather than their creditworthiness. While traditional lenders may subject borrowers to lengthy approval processes and strict credit requirements, these collateral-based loans allow for expedited funding. This makes hard money lending an attractive option for those seeking quick access to capital in a lending market where competitive rates are scarce.
Ultimately, the choice to turn to hard money loans must be a strategic one. So, when does it make most sense for investors, businesses and individuals to leverage them?
Hard Money Loans vs. Traditional Options
When considering hard money loans, it’s essential to understand their unique characteristics. Hard money loans operate within a short-term lending period, typically ranging from 12 to 18 months, with a maximum of 24 months. The short-term nature of these loans is ideal for businesses and investors who have assessed the profitability of the loan against traditional offerings and have a plan in place to transition the hard money loan to permanent financing.
While hard money loan rates aren’t always advantageous, in the current market they’re quite favorable when compared to traditional options. While some 2023 bank interest rates are sitting between 7% and 14%, hard money loan providers can offer hard money loans at 12% to 15%, making them highly competitive.
Moreover, the transparency, fast approval process and collateral-based approach of hard money loans eliminates the bureaucratic hurdles often encountered when dealing with banks. This makes these loans a favorable and simplified choice for a wide variety of borrowers.
Commercial and Residential Application
Construction projects, whether commercial or residential, often require significant financial resources to complete. This is where hard money lending can propel success. With its ability to provide quick funding, investors can act fast with capital in hand — which can make or break a deal — on time-sensitive real estate and development opportunities.
A major advantage of hard money loans for construction projects is rapidly funded draws. Instead of waiting for months to secure bank funding, clients can strategically tap into hard money loans to keep their projects efficient and moving forward. This not only saves time but also proves cost effective in the long run, as the expenses associated with delays can often exceed the financial pull of a hard money loan.
Strategic Borrowing for Business Success
Hard money lending also presents business owners and entrepreneurs with strategic borrowing opportunities, allowing them to seize unexpected, time-sensitive ventures without the need to cut through loads of red tape.
Whether it’s a unique business proposition or an unforeseen market opportunity, hard money loans empower entrepreneurs to act swiftly and without the delays often associated with traditional lending institutions.
An Attractive Option for 2023 and Beyond
All told, hard money lending presents a viable resource in a challenging financial environment. The ability to quickly secure funds, the short-term nature of the loans and the flexibility in application make hard money loans an attractive option.
By considering the unique advantages offered by hard money lending and aligning them with their specific needs, businesses and investors can navigate a complicated lending landscape with confidence and easily tap into opportunities to propel their growth and success.
Quick Fuel for Timely Investments
Hard money lending can make or break a time-sensitive business venture or investment deal. While banks typically require months to approve and distribute traditional loans, hard money lenders can get entrepreneurs and real estate professionals their needed funds in a matter of days.
Elizabeth Hale is CEO and founder eeCPA and co-founder of The Cash Source. For more than 30 years, she has helped entrepreneurs, investors, family offices and commercial real estate developers pinpoint new and creative avenues for growth while mitigating risk. Hale founded Phoenix-based tax consultant firm eeCPA in 2004, then joined John and Marcia Rowley in co-founding The Cash Source in 2018, which offers hard money loans to help driven and unconventional entrepreneurs reach their potential creatively and profitably.