Commercial Hard Money Lender
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A commercial hard money lender is an investor poised to help entrepreneurs, developers and contractors to react swiftly to sudden golden opportunities. Opportunities that could possibly be taken by another more financially able colleague or company. In most cases, a commercial hard money lender is a person who invests in properties, land or other collateral assets with which the man is familiar. The familiarity of the project plays directly into this investor's hand because in typical fashion the lender will already know the potential of the property and can make a quick judgment about becoming involved in the transaction or not. The quickness with which this loan resource person can supply needed cash is the reason all of these shaker and movers look to private money dispensers. They are willing to pay high costs and often put their own property on the line to make the whole deal come together.
A commercial hard money lender doesn't typically hang out a sign advertising his lending availability. In a small town, the lender will probably be quite well known; if for nothing else than wealth. In a city, lenders may be anyone who has a stomach for high risk and tough requirements. Their names may only be known to the elite financial circles. But banks, which traditionally have had no stomach for high risks often refer these borrowers to those who can privately dispense large sums of cash in a hurry. Therein lays one of the secrets of success for the commercial hard money lender. Without government regulations throttling what the investor can do with private money, the investor is free to put any limitations or outrageous demands in the contract that the man desires. Usually these are within a certain limit of reason, but the borrower is never under any illusion; the cost of borrowing will be steep and the loan will have a short shelf life. But like the tightrope walker, the borrower's loan pain will not overshadow the potential profit or accolades.
From the very beginning the borrower comes in a begging position. Perhaps there is a piece of land that has just gone up on the market, like a farm near town or city, or land in town that has been rezoned for business or maybe something such as rundown shopping mall that has potential when remodeled. If the clock is ticking on this property and there are others interested, a hard lender sought over the Internet would have to fly in and see it and that might takes several days or longer to occur. Working with a commercial hard money lender from the area means that from the very first meeting, the investor and the borrower can talk about assets and liabilities regarding the property itself. The lender will want to know just how prepared and well thought out the borrower's plans are, even though the property might have just come up for sale.
The borrower is in a tough spot because he doesn't have the money to make this quick purchase and in many cases, his credit might not be great. The credit problems aren't a big deal to the lender, for the agreement that will be struck will cover him in a secure manner. But the private cash dispenser will very interested in how the borrower is going to get the other forty percent of the money because he will not lend over sixty percent of the full amount. In fact, unless the borrower has a generous stake in this deal personally, it's "Here's the door and don't let it hit you going out." A business man may have to put up a substantial amount of his own cash, or use his business property as collateral or a favorite of the commercial hard money lender, the man's own house. But the security for the loan will be there in substantive ways that will favor the high rolling hard money lender. Jesus had the riches of heaven, but God had a better idea: "For ye know the grace of our Lord Jesus Christ, that, though he was rich, yet for your sakes he became poor, that ye through his poverty might be rich." (II Corinthians 8:9)
It is certain to the borrower that this is going to be expensive money that he will have to get in order purchase this golden parachute project. In many cases commercial hard money lender loans, sometimes called bridge loans, will be in the millions of dollars and the interest rate may be as high as twenty percent or more. In addition to the high interest rate, the borrower will also pay points, with each point worth one percent of the loan's value. Initial points may be as many as four or five and there is usually at least a point assessed if the loan is paid off too early. In most cases the loans are not for more than three years, but they are more likely to be in the 12-18 month range. The entrepreneur requesting the money usually knows that the project that is being created will be able to be sold or utilized within that time frame and payoff, or another long term loan will be available.
The discussion about commercial hard money lender practices brings up an extremely salient point. It should be remembered that this investor is usually an honest business man. Check references before using one and ask the Chamber of Commerce office and Better Business Bureau about his reputation. But honesty can walk hand in hand with greed. Pitifully, the US economy has been based for the past thirty years on outrageous usury by credit card and loan companies breaking the back of so many millions of people. God is not happy and does not bless usurious practices by greed-driven businesses. Perhaps recent economic earthquakes portend judgment upon America for a long list of sins, including usury.
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