For time-sensitive projects that require a funding decision immediately, a hard money loan lender may say yes to your application when a bank says no. A hard money loan has several advantages compared to traditional financing options.
Using a hard money loan comes with less-stringent underwriting guidelines, no restrictions on the usage of funds and the emergence of responsible lending in the hard money loan world. Unlike traditional underwriting, hard money loans can be approved in a short time and with larger loan amounts. Of course, these loans come with higher interest rates.
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Here a few benefits that come with a hard money loan:
One key advantage is the lack of restrictions on the use of funds, unlike traditional financing options. A hard money loan can be utilized for everything from payroll to construction.
For hard money lenders, the valuation of the property being used as collateral for the hard money loan is a major concern when they consider making a deal. That's why these lenders will often allow the proceeds to be used for renovations, construction or equipment repairs and upgrades.
The key to securing capital is demonstrating a solid valuation. If lenders can't assign a proper value to the property, they won't be able to lend as much as they would like. Traditional lenders may assign a valuation that might differ from what a hard money lender may provide. If it's too low, then borrowers will have a hard time justifying the value of the property used as collateral. And that could make it harder for them to get the funds they want.
Business owners need a competitive alternative now more than ever because traditional financing sources have become more selective in the deals that they fund. Alternative lenders have stepped up to fill the gap.
So when the typical bank says no, a hard money lender may say yes. That could be the answer you want to hear.