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Private Lender Hard Money Loans

Look to hard money loans for difficult deals

Hard Money Commercial Mortgage Loans

Privately funded, money commercial mortgage loans are generally equity based and not dependent on the borrower's credit score. Private lenders require much less documentation than conventional, bank or insurance company funded mortgages. For many commercial real estate investors and developers, hard money is their only source of funds.

Private commercial mortgage lending is a by the numbers, no-nonsense business; if you meet the requirements funding comes quickly.

Cash in the deal

Private lenders may not have strict down-payment rules but, virtually all will ask that a borrower have skin-in-the-game. The borrower's cash contribution doesn't necessarily have to mean cash the closing. The investor or builder get's credit for all money put into a building or tract of land. Money spent on hard costs, such as actual site work and soft costs such as engineering and architectural plans will be credited to the borrower as "hard equity" just like a down payment would be. For Private mortgage lenders lack of equity in the project will be a deal breaker.

Equity

Hard money loans are essentially equity loans. It is mandatory that any commercial real estate attempting to be financed through a private lender have substantial equity in it. Loan-to-value ratios (LTV) in the hard money sector are much lower than in conventional.

While private lenders will limit their loans to 50% of the value of raw land, 60% on fully entitled land, or 65% on buildings, most private lenders will allow a seller carry back or other 2nd position mortgage, as-long-as the total amount financed does not exceed 90% of the value of the collateral.

Credibility

Private, hard money loans are not credit driven, but that does not mean private lenders won't check your credit report. Your credit report tells lenders about your character and credibility. No matter how good a deal looks from an equity standpoint, few lenders will risk their capital on obvious deadbeats. You do not have to have perfect credit, but you can't have ugly credit.

Experience

Experienced builder or property owners with a demonstratable track record will stand a better chance of getting funded than a first time investor or developer. Private lenders are savvy professionals and are looking for the same characteristics in their borrowers. The answer is often to bring in an experienced professional as a partner for the first deal or two.

Approval

Borrowers with good character, experience (or has a partner with experience), and that can show both hard (cash) and soft equity in a deal, will be able to find financing.