Commercial hard money loans are viable for business owners seeking short-term financing. These loans offer quick turnaround times and competitive interest rates, making them an attractive option for businesses in need of capital.
Before applying for a commercial hard money loan, it is vital to understand the terms and eligibility requirements. This article will outline the basics of commercial hard money loans.
What is a Commercial Hard Money Loan?
A commercial hard money loan is a short-term loan used to finance a commercial property purchase. The loan is typically based on the property’s value, not on the borrower’s creditworthiness.
Commercial hard money lenders are willing to make loans that traditional banks are not because they are not as interested in the borrower’s creditworthiness as they are in the collateral offered. They also charge higher interest rates and fees than traditional lenders.
However, because commercial hard money loans/florida hard money lender are based on collateral, they are much less risky for lenders, which allows them to be made at a lower rate than unsecured business loans.
And since there is no need for a lengthy application process or an extensive review of financial statements, commercial hard money loans are much faster to obtain than other types of business loans.
What is the Difference Between Commercial Hard Money and a Bank Loan?
Commercial hard money loans are different from bank loans in a few ways.
- First, the approval process for a hard money loan is much faster than for a traditional bank loan.
- Second, the interest rates on a hard money loan are generally higher than on a bank loan because the lender takes on more risk by lending to a business.
- And third, the terms of a hard money loan are typically shorter than those of a traditional bank loan.
These shorter terms mean that borrowers need to be prepared to pay back the principal and interest on the loan quickly, usually within one to three years. So if you’re not sure how long you’ll need to borrow the money, a commercial hard money loan may not be the best choice.
When is a Commercial Hard Money Loan Appropriate?
A commercial hard money loan can be appropriate in certain circumstances, but it’s best to avoid using them if possible. The first circumstance where a commercial hard money loan might make sense is when you buy or refinance a commercial property with very low or no equity value. This makes traditional bank financing prohibitively expensive because the lender would have to waive closing costs and fees to come out ahead on the deal.
For example, if an investor wants to purchase a strip mall worth $1 million but only has $100,000 in cash for the down payment, which means he needs to find another source of funding, he may want to consider a commercial hard money loan.
The second circumstance where a commercial hard money loan might make sense is when you hurry to buy or refinance a property and cannot wait for a traditional bank loan to be approved.
Because commercial lenders typically approve funds within two weeks, versus banks which can take several months, this type of financing may make sense if the closing needs to happen quickly.
For example, an investor wants to purchase a building worth $1 million that has passed all inspections but does not close until next month because the seller wants 30 days to move out. He may want to consider taking out a commercial hard money loan.
The third circumstance where it makes sense to use commercial cash loans is when you have substantial equity in the property bought or refinanced. If an investor has $200,000 in equity and wants to purchase a $1 million property with only $100,000 down, which means he needs to borrow the other $900,000. He may want to consider taking out a commercial hard money loan.
The Benefits of a Commercial Hard Money Loan
Commercial hard money loans Florida can provide business owners with the liquidity they need to take advantage of opportunities and grow their businesses. Some of the key benefits of a commercial hard money loan include:
Speed of Funding: A commercial hard money loan can be funded in as little as ten days, compared to the 30-60 day typical turnaround time for a traditional bank loan.
No Red Tape: Hard money lenders are more flexible and willing to work with business owners than banks. There is typically no red tape or bureaucratic paperwork to slow down the funding process.
Higher Loan-To-Value Ratios: Hard money lenders are typically willing to offer higher loan-to-value ratios (LTVs) than banks, allowing you to borrow more money against the value of your property.
Lower Interest Rates: Because lenders see hard money loans as higher risk, interest rates are lower than traditional bank loans.
More Liquidity: Unlike banks, hard money lenders are typically willing to work with you for funding in 10-30 days (varies by lender), which is beneficial for business owners who need quick cash but don’t want to tie up their assets or pay high-interest rates on short term financing.
No Credit Check: A commercial hard money loan does not require a credit check or an appraisal, which can be extremely helpful for businesses with limited financials and need the funds immediately rather than waiting weeks for approval of a loan package.
The Best Commercial Hard Money Loans in Florida
There are many commercial hard money lenders in Florida like BridgeWell Capital, but not all of them are created equal. When choosing a lender, it’s essential to consider factors such as interest rates, loan terms, and turnaround time.
Here are some things to keep in mind when looking for a commercial hard money loan:
Interest rates: Commercial hard money loans typically have higher interest rates than traditional ones, but they tend to have shorter terms and be less restrictive.
Loan terms: Look for a lender that offers flexible terms that fit your needs.
Turnaround time: The quicker you need the funding, the more likely you’ll need to pay a higher interest rate. Make sure you ask about the lender’s turnaround time and what you will need to do to get the funds as quickly as possible.
Commercial Hard Money Loans are perfect when your business has had an unforeseen expense and needs to cover it quickly without waiting months or years. Experts at BridgeWell Capital, the most trusted investment lender in America will be happy to work with you to get your loan approved quickly and efficiently so that you can move forward on your next project or business venture without any delays.