Businesses hit a slump at some point or the other, it can’t always be smooth sailing, especially when the market is volatile. Startups are another kind of business that struggle to get loans and therefore have to resort to hard money loans.
With the current pandemic in the world, many businesses have taken a great hit, and part of their recovery will have to be via hard money loans on favorable terms.
It’s therefore, essential to be prepared for what’s coming. Here’s everything to know about hard money loans:
What are hard money loans?
Hard money loans are also known as private loans. They are a non-bankable and short-term financing solution to help businesses stay afloat. The collateral for such loans is often commercial real estate.
The underwriting decisions on such loans is based on the value of the underlying asset mainly since clients who opt for such a loan don’t have good credit ratings.
Private lenders process such loans quicker and provide them on much more flexible terms, safeguarding your collateral as much as possible.
How can a business qualify for a hard money loan?
Hard money loans, unlike other loans, don’t depend on your credit worthiness. All that matters in this transaction is the worth of the collateral (real estate) provided. In the event of non-payment of the loan, the lender can take hold of the collateral. Such loans are risky and are taken as a last resort by businesses that are struggling.
Loan to value ratio
Loan to value ratio is the measure of the percentage of money lent in comparison to the value of the collateral. The higher this value, the less likely your application will be accepted. Hard money lenders often cap this ratio at 70%.
Interest rate and other terms of this loan
Private loans often carry a higher interest rate mainly due to the poor credit. Lenders are taking a risk when accepting such loan applications and to offset the added risk they charge a higher interest rate. Interest rates can start at 12% and go up to 25%, depending on the financial position client.
Global Capital Partners Fund LLC, is a popular hard money lender based in NYC. The company has been an essential part of the industry for 30 years now. Their experienced underwriters are quick to approve loans so that commercial clients can close on time-sensitive projects. Till date, the company has lent over $2 billion in loans to their clients. They offer permanent financing, mezzanine property finance, bridge financing, hard money loans, and other debt facilities. Call +1-800-514-7350 to speak with their agents to know more about their services.