The Search for Private Hard Money Lenders
If you are someone looking for a very large loan in order to begin a business, or to bridge a difficult financial period, you are probably quite familiar with the word “no”. This word is used very often by banks receiving requests for business financing. This is due mostly to the shaky status of the current global economy, and though it might be hard to imagine, there are actually private investors who might be able to supply the funds that a bank is unwilling to risk.
Known as hard money lenders, these individuals can often provide sums from half of a million dollars up into the tens of millions for those with a project or business worth the risk. The reason that such investors are willing to front a business or an entrepreneur the enormous sums of money they require is the rate of return such a loan will yield. Currently banks might charge from four to eight percent for business borrowing, but the hard money lenders tend to demand no less than eleven to fifteen percent, or more.
They can ask for such sums because they see some risk in lending the money, though few will give out loans on truly foolhardy or overly risky ventures. What are the loans usually given to? Many hard money lenders work with those in commercial and residential real estate. They might fund an improvement or rehabilitation project, they might underwrite an enormous construction or development program, or they can even purchase extremely costly foreclosures.
Additionally, most hard money lenders want a fast turnaround on the investment. Unlike traditional financial vehicles, which can often require five years or more to see the anticipated returns, a hard money loan will usually require a period of a year or two for the project to payoff.
Even though these lenders are willing to assume a significantly higher level of risk on such investment options, they don’t just blindly jump into any venture. Usually the individual seeking the loan is going to have to have a very workable and comprehensive business plan along with a clearly outlined strategy if they hope to receive the funds. They might also have to be willing to allow the lender to have access to the deed or title of a property or even a guaranteed date when the loan will be repaid in full.
Where do you find hard money lenders? There are all kinds of resources for locating those looking to invest in different business and real estate programs. The Internet is always an excellent tool to begin the process, but it is well-known that many private investors and hard money lenders like to work within a somewhat local radius. This means that a look at local resources is usually a good way to turn up some individuals looking for a good and fast-paced investment. It is important, however, to involve relevant professionals in any part of the process, and the entrepreneur or business owner who is accepting funding from hard money lenders would be well-advised to have their financial or legal team take a look at all documents.
