Hard Money Commercial Loans
- By:Thomas Morva
A hard money commercial loan is an advance for a commercial venture for which conventional funding is not available. In other words, it is money that is difficult to get elsewhere. The purposes for which such loans can be obtained include investments, property acquisitions, construction, business and industry, refinancing and a lot of others.
Suitable collateral is required for obtaining a hard money commercial loan. Third party appraisal on the collateral may not be necessary because the financiers
are experienced enough to assess the value. The loan to value (LTV) ratios are normally up to 75% but some lenders do exceed this. Even second liens are possible if sufficient equity is still available.
Most financiers consider applications for a minimum amount only. The process of application is simple and the lending decision and funds disbursement are quick. There are several instances of the loan being through in one day!
There are short term (six months to three years) loans and loans for longer terms, and also unsecured business loans. The interest rates vary. Currently, a hard money commercial loan could be possible in an interest band of 10% to18%. It could be a floating rate or a fixed rate. Some lenders offer the option of 'interest lock' for short periods. This can be beneficially used if there is the expectation of rates going up. Sometimes the funds are utilized as a bridging loan while waiting for a traditional loan. Certain lenders impose a pre-payment penalty if the loan is repaid ahead of the agreed schedule.
The lenders can be approached directly online or through brokers. In either case, shopping around and comparing the rates and term would be prudent. The main consideration in taking a hard money commercial loan is whether it would generate enough money to comfortably service the borrowing.