What is a Hard Money Loan?

Actium Partners is one of Salt Lake City’s leading providers of hard money loans. What is a hard money loan? It is a very specific kind of loan offered by private lenders to businesses and investors who have neither the time nor the interest to deal with banks. Hard money represents one of the easiest and fastest ways to fund business expansion and asset acquisition outside of the traditional bank paradigm.

The goal of this post is to help you understand exactly what a hard money loan is. If you have questions, please do not hesitate to contact us. We want you to fully understand hard money and how it might fit into your business expansion and investment plans.

 

Hard Money Basics

 

‘What is a hard money loan?’ is one of the most frequently asked questions relating to our business. That is good inasmuch as it tells us that people want access to hard money. At any rate, a hard money loan is a loan secured by a hard asset, generally real estate.

By comparison, banks are required to consider the cash flow of a borrower, in addition to any collateral they have. In evaluating cash flow, they often look for W-2 income, leaving independent contractors and business owners at a disadvantage.

We know this can seem confusing if you’re new to hard money loans, so we put together a list of common hard money terms and definitions.

 

Loan Application Process

 

Hard money loans are obtained through a loan application and approval process. What makes hard money different is that the process is less involved and much faster. A borrower completes our application and submits the information we need to properly value collateral. Then we go to work verifying application data and valuing the property in question.

As long as the information checks out and the offered collateral can support borrowing, a loan is approved. Unlike banks, hard money lenders do not look at personal income, credit history, credit score, etc. to determine eligibility. We are interested in the value and resale potential of offered collateral.

Our shorter and less complicated application process means we can turn over applications in a matter of days. Banks often take weeks to render a decision. Meanwhile, that deal you have been hoping to close can pass through your fingers.

 

Loan Terms

 

Another hallmark of hard money loans relates to terms. While many lenders write loans for long terms and charge prepayment penalties if paid off early, our loans are generally for shorter terms – 6 months to a year. We also NEVER charge prepayment penalties. One borrower paid us off in a week.

 

What They Are Used For

 

Hard money loans are best suited to only a few scenarios, beginning with business expansion. Consider a local Salt Lake City business looking to open a second location. Ownership comes to us for a hard money loan that will enable them to acquire a new piece of property and prepare it for occupation.

Next up are hard money loans for real estate investors and developers. Loans can be used to acquire new properties, improve existing properties, etc. These loans are often made against the very properties they are financing.

Finally, hard money loans are sometimes obtained by real estate professionals who specialize in flipping homes. This is not a business we are actively involved in, but there are other lenders willing to fund house flipping.

Hopefully you now understand the basics of hard money lending. Please do not hesitate to contact us if we can help you with your financing needs. We have money to lend to qualified borrowers.