How to Decide If Hard Money Is Your Best Bet

Hard money is a fantastic tool for funding a full range of projects. It is ideal for real estate transactions, business expansion, and more. But just because hard money works so well for so many needs, that doesn’t mean it’s always the best bet in every situation.

The smart borrower looks at all their options. They compare their needs with the lending opportunities they have access to. In a majority of the cases involving clients we routinely lend to, hard money is the best bet. The question is this: how does one decide?

We put together a list of key questions that can help you figure out if hard money is your best option:

1. Is my project time sensitive?

Hard money is distinct from traditional lending in numerous ways, beginning with the speed at which loans can be funded. Put simply, hard money lenders can get the job done in a matter of days. Ask yourself how time sensitive your current project is.

You might be competing with other investors to buy a highly lucrative property. If you cannot get the deal closed in a certain amount of time, you will be left out in the cold while one of your competitors takes it. Your project could also be time sensitive if your bank backs out at the last minute. We have certainly seen that before.

2. Is a shorter term better in the long run?

Next, ask yourself if a shorter term will be better for you in the long run. Remember that the real killer in terms of the cost of borrowing is the loan term. The longer the term, the more costly a loan ultimately is. Shorter terms can save money and free up your capital more quickly.

Sometimes it doesn’t make sense to continue paying on a long-term loan. It makes better sense to get things squared away in a year or so. If that’s the case, hard money’s short terms may be more attractive than the longer terms you get from traditional financing.

3. Does my bank seem hesitant to get on board?

Many of the loans we hard money lenders make give traditional lenders pause. That doesn’t make the loans excessively risky or unwise. It simply means that they do not line up with a traditional lender’s goals. That’s normal.

As a borrower, you struggle to maintain confidence in a lender who expresses discomfort with your project. Your lender’s hesitancy gives you as much pause as your project gives them. Perhaps a hard money lender is the better way to go.

4. Can the asset support the loan?

Hard money lending is asset-based lending. If the asset you are attempting to acquire has a high enough value to support hard money, it becomes the perfect vehicle for helping you meet your financial goals in both the short and long terms.

A valuable asset allows you to bypass the more lengthy and complicated process of borrowing from traditional lenders. It allows you to go right to hard money lenders capable of funding your loan faster and with fewer requirements and less paperwork. That could make the difference right there.

Over the years, Actium Partners has had the privilege of working with many valued clients for whom hard money was the best possible option. We do not take that lightly. We consider it a privilege to provide alternative financing for real estate investors, business owners, etc.

Is hard money your best bet? Ask and answer the four questions in this post and you will have a pretty good idea of which way to go.