Why A Hard Money Loan Is The Best Option For Your Business
There are times when conventional bank loans may not be an option for business owners. Banks have conservative lending practices, and fewer businesses are seeing loan application approvals these days. Similarly, banks are subject to limitations on the amounts of money they can lend to individual businesses, which may not meet the needs of entrepreneurs. Lately, more business owners are looking to hard money loans in order to get the funding they need to grow their operations. We are going to look at some of the major advantages a hard money loan has over traditional bank financing.
Because a hard money loan comes from the private sector, the waiting time for approval is much shorter than with a conventional bank loan. In many cases, a hard money loan can be arranged and processed in under 48 hours, which means business owners can get the financing they need for time-sensitive projects.
Better rate flexibility
A bank loan often has rates that fluctuate and fees that are sometimes prohibitive to new and small businesses. This can place a strain on cash flow as most of the revenue goes to paying back the loan, instead of growing the business. A hard money loan usually has interest rates, fees, and a payment schedule that are all negotiable – so entrepreneurs and lenders can come to an agreement, rather than being locked into the rates set by a bank.
No penalization for success
Banks often penalize businesses that hit their stride and pay off part or all of a loan ahead of schedule. This leaves debt on the company’s balance sheet for longer than necessary, especially if the funding is there to pay things down. A hard money loan usually does not have such penalties attached to it, which encourages business owners to be successful to pay off the loan.
Stellar credit is not required
One of the big factors that banks use in the loan approval process is the company’s credit rating. More often than not, this means an immediate rejection for new and smaller businesses. A hard money loan does not weight credit ratings as heavily, and some hard money loans are structured independent of credit scores entirely. This means that smaller businesses, or companies that already have debt on their balance sheets can get access to much needed financing through a hard money loan, where banks would outright reject the application.
Finance professionals are willing to work with borrowers
Many businesses are denied bank loans, and they never find out why, or what is needed to improve the chances of approval. Private lenders are typically more willing to work with entrepreneurs to get them to the level where they can secure a hard money loan. Barring that, private lenders will often explore options with business owners to see if there is a hard money loan that can be structured to work around any factors that would otherwise limit them from getting access to funding.