When Can Real Estate Investors Apply for a Hard Money Loan?
Sep 12, 2017
A commercial hard money loan is a valuable financing option for commercial real estate investors to keep in mind, whatever your personal approach to real estate investing may be. Asset-based loans offer unique benefits, but every real estate opportunity is nuanced, and each deserves consideration and an appropriate financing solution to fit the situation.
For many first-time investors (or investors new to hard money loans), there is one common question: “When should you consider applying for a commercial hard money loan?” At Riverdale Funding, whenever you’re ready, we are ready to assist you with funding. Instead, you should always thoroughly examine a real estate opportunity, consult your financial advisor, and weigh your situation with these three questions.
Top 3 Questions to Ask Yourself Before Applying for A Commercial Loan
1. “Do I need a quick loan closing?”
Every commercial loan carries risk, so traditional commercial lenders thoroughly review each property and borrower they lend to. Unfortunately, this is usually a very lengthy process which can take up to a few months to complete. For an investor looking to capitalize on an investment property, that timeframe can risk the opportunity.
Applying for a commercial hard money loan is fast, because the loan process is much more streamlined. For example, we at Riverdale Funding know that sometimes, timing can be every bit as important as location in a real estate deal. Because our review process is streamlined and our hard money loan requirements are less strict than a traditional lender’s, our fast-funded loans can provide you with the edge you need to attract a seller’s attention. In many cases, a hard money loan can be funded within days or a week, compared to the month or longer it may take to fund a traditional loan.
2. “Do I have a bad credit standing?”
Bankruptcy, foreclosure, or late payments can have drastic effects on a bank’s decision to lend. A range of factors are frequently boiled down to one number, your credit score – and this score can prevent reliable borrowers from securing commercial financing. Financial statements relating to a property or business can also prevent funding, as banks try to avoid and perceived risks associated with taking on a loan.
Asset-based lending like that of Riverdale Funding considers neither credit scores nor financial statements. Riverdale Funding provides asset-based financing, which means we base our decision to lend (and how much we lend) on the value of the property. Because we focus our lending limits on the property’s value rather than on the credit history of the borrower, we can provide commercial loans for both borrowers and properties that fall outside bank lending guidelines.
3. “Do I need to have flexible terms?"
Strict lending guidelines don’t just apply to credit scores. Commercial lenders have a range of other policies designed to mitigate the risk associated with funding a commercial loan, but unfortunately, this means they aren’t very flexible. Should a loan fall outside of the bank’s underwriting guidelines, it won’t be approved.
If you are looking for a flexible loan structure, then applying for commercial hard money loan may be the appropriate solution. For example, Riverdale Funding offers cash out refinances and interest-only payments.
Determining Your Hard Money Lender
If, after reviewing a real estate opportunity, you have determined that a hard money loan is the best fit, the next step is determining the right hard money lender – because each hard money lender is different. While we can’t speak for anyone else, we can offer some detail as to what has established Riverdale Funding as an unparalleled express commercial hard money lender.
What Should You Expect from Riverdale Funding?
We’re committed to creating a reliable borrowing experience. This means that we treat each deal with importance and review each loan file with a common-sense underwriting approach. We understand that every deal is different, and we’re committed to creating opportunities for borrowers and properties which don’t fall into traditional lending guidelines, or which would otherwise benefit from flexible terms.
Ultimately, your commercial loan is a personal decision – and the commercial lender you choose is a personal decision, as well. If you’re considering a hard money loan, we hope you now feel empowered to make that decision with confidence. And of course, we’re always here to help.
This article was originally posted on October 09, 2015 and updated on September 12, 2017.