What Companies Should Know Before Applying for Hard Money Loans
When you need working capital, you don’t want to wait a month. However, if you apply for a traditional business loan, you may have to do just that. Fortunately, there are other options.
Hard money loans, also called bridge loans, are specifically designed for companies that need cash fast. If you’re interested in expanding your customer base, purchasing a location or manufacturing new products, this type of financing may be the perfect option.
How Do Hard Money Loans Work?
Hard money financing is usually offered through private lenders rather than traditional banks and credit unions. Private money lenders aren’t as heavily regulated as the aforementioned financial institutions, which means they can provide a wider variety of financial products, including those that rely on collateral value.
Bridge loans are short-term, as they normally last 2 years or less. Application time is quick, with some borrowers getting their funds within 24 hours.
What Are the Benefits?
The biggest benefit for borrowers is the short approval time. If there’s a business opportunity you want to jump on, you need cash as fast as possible, which is why bridge financing is so advantageous. It’s also a great option if you want to purchase an investment property, as having cash can give you an edge when negotiating.
Additionally, you don’t have to worry about getting stuck in decades of payments. Many business loans can last up to 7 years, and mortgages can last up to 30. Bridge loans let you access capital without having the debt on your credit history for years to come.
Who Should Apply?
Due to the risk associated with short-term lending, most lenders require a good credit score. If you have bankruptcies in your past or a high debt-to-income ratio, you may not qualify. The interest rates also tend to be higher on these types of loans.
However, if you need cash immediately, you’ll be hard-pressed to find a better option. There’s also less paperwork involved in the application process, so you don’t have to spend time and effort gathering documents.
What Should You Look for in a Lender?
You should look for a local lender, especially if you’re buying property. Local lenders know the market and are usually more invested in the area’s success. Additionally, you should always compare offers to ensure you’re getting the best deal.
If a traditional business loan just won’t do, it’s time to look at hard money financing. There are many private lenders ready to provide the capital you need for success. With a little research, you can find the perfect option and take your business to new heights.